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Opec may not suspend production limits

While all Opec producers bar Saudi Arabia are pumping flat out, a situation unlikely to change until runaway oil prices are brought under control, an official group free-for-all has yet to gain currency within the 11-member exporters’ group that meets on September 15.

“Unofficially the quotas effectively have been suspended, and most likely they will continue to be suspended until prices come down,” said an Opec delegate. “So why create a dispute by turning this into a formal agreement?” A call by Western-friendly Opec powers for the group to abandon output restraints during the US-led war on Iraq last year was rejected by Iran, who said the proposal implied support for a US attack on Iraq.

The political implications of a formal quota suspension could once again dissuade some in the Opec from explicit endorsement.

“There has been no such talk at all about suspending the ceiling,” said Iran’s Opec governor Hossein Kazempour Ardebili.

The idea has, however, made the rounds with oil dealers who might see a free-for-all as a tempting opportunity to sell crude.

With oil prices close to $50 a barrel, there is every incentive for Opec to produce as much as it can.

The group is churning out some 30 million bpd, putting its 10 members bound by quotas two million bpd above a formal ceiling of 26 million and leaving all but Saudi Arabia stretched to the limit. Western oil executives see Riyadh cranking up towards 10 million next month.