Opec forecast to hold quota despite looming oversupply
Saudi Arabia and allies may have to produce less crude next year to meet falling demand
Even with the Organisation of Petroleum Exporting Countries forecast to keep its output quota unchanged at a meeting this week, falling oil demand and prospects for increased supply from some member states mean the group's leader, Saudi Arabia, will have to cut production anyway.
The 12-nation group meets in Vienna tomorrow and will reaffirm its collective limit of 30 million barrels a day, according to analysts.
Opec is producing above target, even with output disrupted in member states Iraq, Libya and Iran. Demand for the group's crude will decline by about 900,000 barrels a day next year as the United States pumps the most in almost 25 years, the International Energy Agency says.
A glut would lower prices that are averaging more than US$100 a barrel for a fourth year, curbing revenue for Persian Gulf nations that on average rely on the sales for about 80 per cent of government revenue.
"Next year Opec's going to have to act," said Seth Kleinman, the head of energy strategy at Citigroup. "There's a lot of crude that's coming. Iraq is coming in 2014, there's no sign of the US stopping, and you have to believe you're going to see more leakage from Iran. It could be anywhere from one million to two million barrels a day that the market could be looking for Saudi Arabia" to cut.
Brent, the benchmark grade used to price much of the crude produced by Opec, averaged US$108.54 a barrel this year, the third-highest level in data starting in 1988.