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Key oil ministers say OPEC likely to maintain current production targets

High crude prices are not putting the brakes on global economic growth, and there is no reason for OPEC to change its production targets, key oil ministers said yesterday on the eve of a key meeting of the cartel.

United Arab Emirates' Energy Minister Mohamed Bin Dhaen al-Hamli the told the pan-Arab newspaper al-Hayat that the world economy was still growing briskly, "showing that the impact of oil prices is limited" despite concerns that stubbornly high prices could trigger a slowdown.

With prices hovering around US$67 a barrel and supplies outstripping demand, the 11-nation OPEC almost certainly will keep its current production quota steady when it meets today in Vienna, al-Hamli said.

"Inventories are comfortable, prices are coming down and nobody, I hope, is concerned about shortages of supply," said Saudi Arabian Oil Minister Ali Naimi. "We are very happy with the situation."

Although prices are more than US$10 a barrel off their July highs, economists concede that jittery market sentiment -- fueled by pipeline problems and political turmoil in the Middle East -- does not leave OPEC with much choice. Cutting output would drive prices even higher, and pumping more is not an option for most members already producing at maximum capacity.

"There's a lot of pressure there. I don't think we'll see any real change," said Jason Schenker, an economist with US-based Wachovia Corp.

OPEC's production target is now 28 million barrels a day, excluding Iraq, which is not part of the group's quota system. The cartel meets about 40 percent of the world's demand for crude.

Oil has been edging lower since light sweet crude hit a record US$78.40 a barrel on July 14, two days after fighting erupted in Lebanon.

It dipped below US$67 a barrel on Friday as traders focused on slackening demand and rising supplies.

Global production has taken a hit from BP's leak-prone Alaskan oil pipelines, outages in Iraq and Nigeria, Africa's biggest producer -- where militants have attacked oil infrastructure -- and concerns over Iran's escalating nuclear standoff with the UN Security Council.

OPEC president Edmund Daukoru, conceding the cartel has been "more or less on autopilot," said members would take a hard look at the latest trends.

"We're going to have to review the price fall and see if this signals a longer-term decline," said Daukoru, who doubles as Nigeria's oil minister.

"We have to assess whether the fall is in line with fundamentals or the fear factors, which appear to be more under control," Daukoru said.

But supplies remain ample. al-Hamli said OPEC maintains about 2 million barrels a day of spare capacity, and stocks are high elsewhere; the US Department of Energy said last week that inventories have hit their highest levels since 1998.

"Prices are going down, but this is a correction. What we are seeing is a fluctuation," Shukri Ghanem, the chairman of Libya's National Oil Corp, said yesterday. "We are working in a free market, and we expect prices to go up and down."
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