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OPEC reportedly mulls suspending quotas

OPEC could consider the possibility of temporarily suspending its output quotas at a meeting in Beirut next week, an OPEC source said on Friday.
/ Source: Reuters

OPEC could consider the possibility of temporarily suspending its output quotas at a meeting in Beirut next week, an OPEC source said on Friday.

The source told Reuters that such a move could not be ruled out, given that most in OPEC already were pumping at full capacity.

The Middle East Economic Survey also reported on Friday that removing output restrictions might make raising OPEC’s official target price from $22-$28 acceptable. Several ministers want to lift the official target.

“MEES understands that major OPEC producers are agreed that it would be politically unpalatable to raise the OPEC price band under current market conditions, unless it was part of a wider package of measures,” the weekly newsletter said.

Suspending output quotas temporarily would make little difference to actual output but could provide the psychological impact on prices that OPEC’s President Purnomo Yusgiantoro spoke of in Jakarta on Thursday.

It would also give official cartel blessing for Saudi to pump more without blatantly ignoring any new, higher quota.

Several ministers from the Organization of the Petroleum Exporting Countries were quizzed by reporters at a meeting in Amsterdam from May 22-24 on whether they would consider the tactic.

None reacted positively but neither was it dismissed.

Saudi Arabia has proposed OPEC raise production quotas by 2-2.5 million barrels a day, 8-11 percent.

The group is already estimated to be pumping about 2.3 million bpd above the existing limit of 23.5 million bpd with little, if any, immediate spare capacity other than from Saudi.

Saudi Arabia has already pledged to pump at least nine million bpd next month, a real extra addition of some 700,000 bpd.

Assuming an increase is divided pro-rata, nine million bpd is far above any quota Riyadh would be granted under a group increase in the range 2-2.5 million bpd.

Saudi Arabia’s official quota now is 7.638 million bpd, 32.5 percent of the OPEC total.

Under a pro-rata 2-2.5 million bpd increase Saudi would would get an official quota of 8.29-8.45 million bpd.