The source was speaking after an informal meeting of the oil ministers of Saudi Arabia, Kuwait, the United Arab Emirates and Qatar in Vienna and after US Energy Secretary Sam Bodman told reporters in Florida he had encouraged Opec to hike production.
Opec’s 12 members will meet today to set oil supplies for the peak winter demand season. An increase of 500,000 barrels per day (bpd) would placate consumer nations without flooding the market and causing a price collapse.
But such a plan may struggle to win support from members including Iran and Venezuela that take a more hawkish price view.
“They favour a small increase,” the source said of the Gulf Arab states..
Opec, pumping some 30mn barrels per day into the 86mn bpd global market, is trying to make sense of conflicting economic data ahead of today’s meeting.
Industrialised consumer nations are forecasting their crude oil stocks will fall to the bottom of the five-year average range by January unless Opec pumps more crude oil, and fast.
US crude oil is above $ 76, close to its August 1 record high of $ 78.77 a barrel.
But uncertainty over the US economy—last month employers cut jobs for the first time in four years—has cast doubt over oil demand growth in the world’s top consumer.
The views of the Gulf states, particularly the world’s biggest exporter Saudi Arabia, are key to Opec policy decisions. They straddle more than half of Opec’s proven oil reserves and have almost all the organisation’s spare production capacity.
A small rise would unwind some of the 1.7mn bpd of cuts agreed since Oct 2006 without making a ripple. The 10 Opec states subject to restraint are already pumping nearly 1.0mn bpd above their 25.8mn bpd limit.
“The impact of any decision seems marginalised by physical production already above official output limits,” Citigroup analysts noted.
The position adopted by the Gulf Arab states marked a shift for most. The ministers of Kuwait, Qatar and the UAE had all said on arrival that crude oil supplies were ample. Some said they were concerned credit turmoil stemming from US subprime loans might hit the real economy.
Before the Gulf countries’ meeting yesterday, Qatar’s Deputy Premier and Energy Minister Abdullah bin Hamad al-Attiyah, who is in favour of keeping output unchanged, said: “What if I increase oil (production), and nobody will buy it?”
In 1997, Opec increased output as the Asian financial crisis was developing and crude prices crashed to $ 10 in 1999 because of falling demand and fears of a global recession.
“We don’t want the world economy dragged (by oil prices),” said Attiyah. “We know if the US catches a cold then we will start coughing.”
Abd acting Kuwaiti Oil Minister Mohamed al-Olaim said earlier yesterday: “Kuwait is inclined to keep the output level without change while monitoring the market continuously”.
Demand forecasts for the final quarter of the year point to an increase of up to 2mn bpd. At the top end, the International Energy Agency sees consumption rising to 88.1mn bpd. Opec puts the figure at 87.08mn bpd.
US Secretary of Energy Sam Bodman told reporters in Florida he had encouraged Opec to increase supplies. “They heard. They were courteous,” he said.
The IEA’s executive director, Nobuo Tanaka, said he believed extra oil would be needed in coming months. “We think that the current market is very tight,” he said at a news conference in Berlin.
Experts at Barclays Capital have warned that “complete ministerial inaction would most likely mean not only new all-time highs being set, but highs well into the $ 80 and perhaps beyond.”
The uncertainty about the world economy stems from problems in the US housing sector, which have caused losses for banks and raised concerns that companies could face problems acquiring credit.
