With oil prices slumping, OPEC ministers are expected to be in damage-control mode as they meet this week to discuss production quotas that some members are blatantly ignoring.
There will probably be grumbling about some members, particularly Venezuela and Nigeria, cheating on their production caps. But leaders of the Organization of the Petroleum Exporting Countries will be careful to avoid any words or action that could further upset markets.
“Probably OPEC is hanging on and hoping this is as bad as it gets,” said Peter Bogin, associate director of Cambridge Energy Research Associates in Paris.
OPEC is getting about $17 a barrel for its oil, down from an average of close to $19 a barrel in May and more than $20 per barrel during the first quarter.
Analysts predict that OPEC will maintain its production ceiling of 25.033 million barrels a day--and hope to avoid any disputes that could prompt traders to sell oil.
OPEC’s official cap on oil production is largely symbolic, because the oil states are believed to be pumping closer to 27 million barrels a day.
Because the price has not collapsed, there is no incentive for the cheaters to cut back and, as usual, there is little the rest of the group can do about it even though OPEC is far short of its target price of $21 per barrel.
“There’s no more ‘they’ in OPEC,” Bogin said. “It’s really 11 different countries with 11 different views on the oil market. OPEC doesn’t speak with its own voice.
“It’s hard to come to any conclusions on something as important as the quotas,” Bogin said.
But Iran’s oil minister, Gholamreza Aghazadeh, said cheating could be an important topic of discussion at the meeting that formally opens Wednesday. Ministers will hold a variety of sessions in smaller groups before that.
“In spring, the oil market normally faces a slump but the improvement of the situation depends on OPEC itself,” Aghazadeh said in remarks carried Sunday by the state-run Islamic Republic News Agency.
The Iranian minister acknowledged OPEC cannot punish its quota-busters but hoped a “political understanding” might prompt them to cut back.
The price of crude has gotten a short-term lift from a dispute between the Iraqis and the United Nations.
Iraq said recently that it would suspend all oil exports to protest what it called meddling by the United States in its efforts to use the proceeds to buy food for its people.
Iraq’s oil exports were shut down by the United Nations after it invaded fellow OPEC member Kuwait in 1990, but a U.N. deal now lets the Iraqis sell limited amounts of crude to get food and medicine for suffering citizens.
OPEC members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.