DUBAI (Reuters) – OPEC members with spare capacity are ready to pump above agreed limits if there is a need, but the producer group is unlikely to formally change output targets at a meeting in June, Gulf delegates told Reuters on Monday.
Top producer Saudi Arabia in February raised output above 9 million barrels per day (bpd), around a million bpd more than its OPEC output limit, in response to supply disruption in OPEC member Libya that drove oil prices to their highest since the record rally of 2008.
But in March, Saudi Arabia scaled back to around 8.3 million bpd, citing oversupply and weaker demand in part because of the earthquakes and nuclear catastrophe in Japan. Its April production figures are not yet public.
“Floating stocks are higher, and with weaker demand from Japan that led to the cut in Saudi production, as of now it’s unlikely that quotas will be changed in June, but Saudi is still ready to supply the market,” one Gulf delegate told Reuters.
“Increasing production is a sovereign issue for Saudi, and it’s been said over and over again that Saudi is ready to fill any supply gap,” said another Gulf OPEC delegate.
Saudi’s fellow Gulf producers — including the United Arab Emirates and Kuwait which also hold spare capacity that can be quickly added to the market — joined it in increasing output earlier this year.
“This is proof that Gulf countries are ready to act when extra supply is needed and this will always be the strategy even if there is no change in quotas,” the delegate said further.
The delegate did not make clear whether the other Gulf states followed Saudi Arabia’s lead in reducing supply after the initial increase.
OPEC last formally discussed output policy in December and is not scheduled to do so again until June. Members have ruled out holding an emergency meeting before then, even though governments in consumer countries are facing domestic pressure because of high fuel prices.
Brent prices rose above $124 a barrel on Monday, driven by the ongoing violence in Libya and an escalation of unrest in Syria, which has some oil and has raised concerns in the market of more widespread turmoil.
OPEC members have repeatedly said the oil market is driven by fear and speculation rather than any shortage of oil.
“There is no good reason for prices to be where they are right now. If you look at the fundamentals you’ll see that the market is oversupplied and demand is not that strong. This is just misinformation,” said a third Gulf OPEC delegate.