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OPEC chief says output quotas irrelevant

With almost all of  its members pumping as fast as they can, OPEC’s president said on Monday the cartel would keep pumping near full tilt through June and suggested that the group’s formal system of production quota limits was irrelevant for the time being.
/ Source: Reuters

OPEC’s president said on Monday the cartel would keep pumping near full tilt through June and suggested that the group’s formal system of production quota limits was irrelevant for the time being.

“I think now we are dealing with the production without the quotas,” Sheikh Ahmad al-Fahd al-Sabah, also Kuwaiti oil minister, told reporters at the Kuwaiti parliament.

“Real production in the market now is 29.7 million ... This is the OPEC-10 without Iraq. We believe in June we will continue with the same level.”

That rate would put cartel output at 25-year highs and leaves the 10 OPEC members bound by quotas, except Iraq, more than two million bpd above a formal 27.5 million production ceiling.

The Organization of the Petroleum Exporting Countries has steadily ramped up output since mid-March to build a cushion of oil stocks ahead of an expected fourth quarter demand surge.
But industry experts tracking OPEC flows said Sheikh Ahmad’s figures were running on the high side.

A Reuters survey shows production for the OPEC-10 at 27.95 million bpd in April. That is expected to rise this month, but come in lower than the OPEC chief’s figure. OPEC, which controls half the world’s crude exports, meets again on June 15 in Vienna to chart production strategy for the second half of the year.

Of OPEC, only Saudi Arabia now holds significant spare production capacity. Saudi officials said the kingdom last month pumped just over 9.5 million -- leaving spare capacity of 1.5 million bpd versus official capacity of 11 million.

Industry sources expect Riyadh to raise output still further in May. The OPEC president supported their expectation.

“I think almost 10,” he said when asked what level Riyadh was producing.

While Saudi and others are pumping in excess of official quota limits, member countries Indonesia and Venezuela have been unable to meet their quotas.