Opec to maintain production quotas despite price fall

London: Opec oil producers meeting in Vienna on Monday will keep pumping enough to satisfy consumer countries unhappy with $67 a barrel oil, but an $11 drop in the price since mid-July may encourage some to push for cuts further out.

The Organisation of Petroleum Exporting Countries has ramped up production for more than a year to the highest level since 1979 to fill the world's oil tanks as a cushion against supply shocks.

The Saudi-driven policy has succeeded, with no demand left unmet as refiners store away Opec crude.

Oil has fallen sharply from its $78.40 a barrel record high of July 14, when Israeli strikes on Lebanon led to fears of a wider Middle East conflict. But it is still above $67, compared with $61 at the start of the year and $20 at the start of 2002.

"At the end of the day, we've still got hurricane season and the bulk of winter to get through," said Yasser Elguindi of Medley Global Advisors.

"I don't see any aggressive calls for cutting production at this meeting."

But some of Opec's 11 members are concerned by the outlook for 2007, when demand for their oil could drop sharply if independent producers bring on projects for new crude.

Opec economists predict a drop of 800,000 bpd in the requirement for the group's oil.

Slowing economic growth would further erode demand for Opec oil and raise the prospect of a price collapse.

"Opec will need to cut production next year and the debate is going to heat up," said Roger Diwan of PFC Energy. "The September meeting will be a good gauge of positions."

Opec's production ceiling for its 10 members bound by quotas, excluding Iraq, was set at 28 million bpd in July 2005. Output this year has run just below the official limit, with everyone save top exporter Saudi Arabia pumping flat out.

Riyadh holds most of Opec's spare production capacity. Pumping at about 9.2 million bpd leaves it more than 2 million bpd in reserve.

"The Saudis want stability above all else, and with several weeks left yet for peak hurricane season, ensuring the market is well supplied is a priority," said Elguindi.

While the kingdom has given its customers everything they want, it has steadfastly refused to discount barrels to force feed the market and depress prices.

Iran sees no change in group's output policy

Opec is likely to keep oil production steady when it meets to chart output policy next week, Iran's deputy oil minister said .

"I don't expect any change winter is coming," Nejad Hosseinian, Iran's deputy oil minister, told reporters in Singapore, where he was attending an LNG conference. Iran's oil minister has expressed a similar view.

Hosseinian's comments follow those of Algerian Energy and Mines Minister Chakib Khelil, who was quoted on Wednesday as saying there was consensus among Opec ministers to hold output unchanged when they meet in Vienna on September 11.