OPEC set for oil production rollover – report

OPEC ministers are likely to leave crude oil output on hold when they meet in Vienna on Thursday, with oil prices trading above 60 dollars a barrel after the heavy losses in January, the Middle East Economic Survey reported Monday.

The latest surveys of OPEC output indicate that member countries started cutting additional volumes in February, so ministers are more likely to focus on improving output compliance than discussing fresh cuts.

However, much will depend upon OPEC’s latest supply and demand balance forecast for the second quarter, a period when oil demand tends to slip lower after the end of the high-demand northern hemisphere winter, the MEES report said.

In particular, ministers will survey demand figures that show a considerable softening of the OECD demand during the first quarter and the extent to which this is compensated for by strong Asian and Middle East oil demand growth which, according to OPEC, accounted for more than 90% of global growth in the first quarter.

But while oil prices are well below the 78 dollars-a-barrel peak of 2006, there are concerns within OPEC that prices above 60 dollars a barrel could damage demand in the longer run, by prompting conservation and alternative energy technologies.

Although these concerns have yet top be articulated, the MEES report suggested that some delegates are privately concerned that tighter monetary conditions and the ballooning of U.S. trade deficit could shave global economic expansion particularly in the developing world, the source of the bulk of oil demand growth.