OPEC Bickers Over Oil Output Targets
While dissention is rising among the members of OPEC regarding the current oil (NYSEARCA:USO) output quota system, members speculate the issue will likely not be resolved at the upcoming December 14 meeting in Vienna. Saudi Arabia and its allies began exceeding its set quota when Libya’s crude supply decreased due to the Libyan Civil War. Iran now argues that Libya’s output is back up and Saudi Arabia, Kuwait, and others should return to their quota levels.
The Organization of Petroleum Exporting Countries believes that there is too much uncertainty in oil markets to revisit quota limits at the upcoming meeting. The European debt crisis has caused volatility in oil demand and the Libyan situation has resulted in supply fluctuation. While many OPEC officials believe that increases in quotas are forth coming, a Senior Gulf OPEC leader said, “We are likely to see a more serious action only in the following meeting next year,” per MarketWatch.
There is a growing discrepancy between OPEC quota production and demand. OPEC estimates that demand will average 30.78 million barrels per day in the latter half of 2012 which is more than 1 million barrels more than current output. MarketWatch quoted one frustrated Gulf official who said, “OPEC needs to find out a solution next year for the discrepancy between call on OPEC [crude] and OPEC’s quota.”