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POLL-OPEC to keep oil output steady after prices rise

Published 05/21/2009, 06:54 AM
Updated 05/21/2009, 06:56 AM
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* OPEC meets in Vienna on May 28

* 11 of 12 analysts see no change in OPEC output quotas

* One analyst sees production cut of up to 1 million bpd

By Christopher Johnson

LONDON, May 21 (Reuters) - OPEC oil exporters will agree next week to keep production levels unchanged as rising prices have eased pressure on budgets and there are hints of economic recovery over the next year, a Reuters poll showed on Thursday.

Eleven of 12 oil analysts and economists surveyed by Reuters predicted the Organization of Petroleum Exporting Countries would maintain output and stress again the need for adherence to existing quotas when they meet in Vienna on May 28.

One dissenting analyst said OPEC needed to cut production by as much as 1 million barrels per day (bpd) to drain inventories.

"Output cuts will not really be on the agenda next week," Frank Schallenberger, head of commodity research at Landesbank, said. "With prices around $60 per barrel, the situation has changed a lot from the last meeting on March 15."

Oil prices have risen sharply over the last three months with benchmark U.S. crude oil futures reaching a six-month high of more than $62 on Wednesday from around $34 in February and a low of $32.40 in December.

Economists calculate that at $40 per barrel, 11 of OPEC's 12 members, as well as non-members Russia and Mexico, faced budget deficits.

But with the market around $60, most of the oil exporters are much more comfortable and can avoid the difficult question of how and where to cut output if it needs to be trimmed.

COMPLIANCE

The key problem for OPEC is a worldwide collapse in the use of oil since the economic crisis took hold last year.

The International Energy Agency (IEA), adviser to 28 industrialised countries, believes global oil demand will be more than 2.5 million bpd lower this year than in 2008 at around 83.2 million bpd and this will cut sharply demand for OPEC oil.

OPEC has said it would cut 4.2 million bpd from its production levels last September and, at its most disciplined, managed to deliver around 80 percent of the promised cuts.

Some analysts have said compliance has slipped slightly as prices have risen and OPEC's own monthly report pegged it at 77 percent.

Venezuela, Angola, Nigeria and Iran have all been accused of over producing.

Cutting production is painful and Saudi Arabia, by far the largest OPEC producer and exporter, has insisted in the past that discipline be improved before any more cuts are considered.

David Hufton, managing director of brokers PVM in London, said OPEC would not cut production because it already has problems with compliance.

"If anything, I expect to see further OPEC supply slippage and reducing compliance levels," he said.

The one dissenting voice in the Reuters poll was David Wech, head of energy studies at consultants JBC Energy in Vienna, who argued the fundamentals of supply and demand in the market were so weak OPEC needed to cut production.

"OPEC will have to cut again -- potentially 1 million bpd for a limited period of time -- until demand shows healthy signs of improvement," he said.

Will OPEC change its oil production targets on May 28?

(million bpd if change forecast) Barclays Capital NO BNP Paribas NO Centre for Global Energy Studies NO Commerzbank NO IHS Global Insight NO J.P.Morgan NO JBC Energy YES (cut of as much as 1.0) Landesbank NO MFC Global Asset Management NO Petromatrix NO PVM NO Societe Generale NO AVERAGE FORECAST (MODE AND MEDIAN) NO (Additional reporting by Barbara Lewis; editing by Keiron Henderson)

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