updated 9/11/2006 1:57:05 PM ET 2006-09-11T17:57:05

OPEC kept its official production target steady on Monday but left open the possibility of an output cut later this year with a promise to “vigilantly” monitor market conditions that have driven oil prices to five-month lows.

Organization of Petroleum Exporting Countries President Edmund Daukoru, who is also Nigeria’s oil minister, said he would consult with other members “should market conditions warrant” action before they meet again in December.

For now, the group that produces about 40 percent of the world’s crude-oil said supplies are ample — an assessment backed up by a more than $10-a-barrel decline in oil prices over the past month.

OPEC’s decision means its output quota will hold steady at 28 million barrels a day. Including Iraq, which is not bound by the quota system, the 11-member cartel’s daily production is roughly 30 million barrels.

Daukoru said the cartel wants to see whether prices are in a free fall or are merely reacting to high inventories, the cessation of hostilities in Lebanon and progress in talks between Iran and Western powers trying to contain its suspect nuclear program.

Light sweet crude for October delivery was flat at $66.25 a barrel Monday on the New York Mercantile Exchange.

Prices have plunged by about $12 since light sweet crude hit a record $78.40 in mid-July, just after fighting erupted in Lebanon. Each $10 drop in price, analysts say, translates into a 25-cent drop at the gas pump. In the U.S., retail gasoline prices average $2.62 a gallon.

Some OPEC ministers, including Iran’s Kazem Vaziri Hamaneh, had suggested that prices shouldn’t be allowed to fall below $60.

Daukoru said a consensus emerged about the optimal price, but was evasive when asked what that was, saying: “It’s a marketplace. ... It cannot be specified.”

Analysts said one alternative to formally cutting production targets, which could unsettle already jittery markets and send prices soaring again, could be to have members quietly and informally pump less.

“You get the sense that the number that they’re going to defend is probably a lot closer to $60 a barrel than it is to $50 a barrel,” said John Kilduff, an oil analyst at Fimat USA in New York.

Whether or not OPEC succeeds, however, in putting a floor underneath prices “will come down to whether or not they can exert discipline” in the event that the output quota is reduced, Kilduff said.

Excluding Iraq the group is now pumping about 27.5 million barrels a day — half a million barrels under its target — said Ali Naimi, oil minister of Saudi Arabia, the world’s No. 1 oil exporter.

Naimi said Monday he was “very optimistic” about global oil demand next year, playing down concerns that world economic growth may be slowing and characterizing recent price drops as insignificant “blips.”

Supplies remain ample despite concerns over Iran, losses from BP PLC’s leak-prone Alaskan oil pipelines, chronic outages in Iraq and attacks on oil infrastructure by militants in Nigeria — Africa’s biggest producer. U.S. inventories are at their highest levels since 1998, the Department of Energy reported last week.

Iraqi oil minister Hussain al-Shahristani said Monday his government will reinforce its military presence in the north of the country to protect oil facilities targeted by saboteurs. Iraq produces more than 2 million barrels a day.

Daukoru expressed concern Monday that prices could face further pressure in 2007 if production from non-OPEC nations such as Angola, Brazil and Caspian Sea countries like Azerbaijan rises significantly as expected.

In the longer term, however, he expressed confidence that OPEC’s market share would increase because the outsiders can offer only crude that needs more refining, not the higher-quality light sweet crude that the cartel offers.

Daukoru brushed aside concerns that crude prices — still at historically high levels — could put the brakes on the global economy, pointing to forecasts of 4.2 percent world economic growth for 2007.

OPEC members failed to agree Monday on whether to appoint a new secretary-general, a mostly symbolic post now held by Nigeria.

Iran has been lobbying for the job, arguing that as the cartel’s No. 2 producer, it has a right to a top leadership slot. OPEC has shut Iran out of the position since the 1979 Islamic Revolution.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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