Thursday, Jun 14, 2012

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By Hassan Hafidh, James Herron and Summer Said

VIENNA--OPEC Thursday agreed to maintain its existing oil-production ceiling and pledged to rein in overproduction after some members complained that a glut of oil could lead to a price crash.

The decision to roll over the group's production ceiling had been expected for days. But an OPEC communique included strong language warning of a global economic slowdown and calling on members to "adhere" to the current production ceiling of 30 million barrels a day. OPEC is currently pumping around 31.6 million barrels a day.

If members back up their pledge to improve compliance with the group's collective production limit by curbing their oil output, that could help to give support to oil prices in the months ahead.

When asked if members now have individual production quotas, Secretary General Abdalla Salem el-Badri said, "Every country knows its number."

OPEC had not agreed on individual output quotas in December, however, when it first set the group's combined production limit of 30 million barrels a day.

OPEC's official communique Thursday didn't disclose any individual production quotas for its members.

Saudi Arabia, OPEC's largest oil exporter, produced around 9.9 million barrels a day in May, an extremely high level.

The lofty Saudi output follows lobbying of Saudi Arabia by the United States, the European Union and others to raise output in anticipation of sanctions on Iran.

Saudi oil minister Ali Naimi said Thursday he was "happy" with the OPEC agreement, but avoided further comment.

Mr. Naimi, considered a moderate within OPEC, had initially this week floated a plan to raise the production ceiling, but quickly backed off the idea. Other OPEC members this week had expressed criticism of Gulf countries for boosting output so aggressively in spite of the weakening economy.

Mr. el-Badri said OPEC didn't discuss an oil-price level at which OPEC would call an emergency meeting if oil prices drop further.

But OPEC's communique called on members to adhere to the collective production limit and warned the global economy faces downside risks.

"Member countries confirmed their readiness to swiftly respond to developments that might place oil market stability in jeopardy," the communique said. Given macroeconomic risks, OPEC directed its Secretariat "to continue closely monitoring developments in the months ahead."

OPEC also said it expects a continued overhang in oil inventories for the industrialized countries of the Organization for Economic Co-operation & Development.

"This overhang is predicted to continue throughout 2012," the communique said. "The second half of the year could see a further easing in fundamentals, despite seasonally-higher demand."

The group also discussed candidates for a new OPEC secretary general, but they didn't reach agreement on the matter. When selected, the new candidate will replace Mr. el-Badri, who has held the post since January, 2007. Mr. el-Badri is set to leave at the end of the year.

Saudi Arabia, Iran, Iraq and Ecuador have each proposed their own candidates for the post.

OPEC agreed Thursday to set up a committee to study the qualifications of the four candidates for secretary general, Iraq's oil minister Abdul Kareem Luaiby said.

Several OPEC members this week expressed concern over oil prices, which have lost more than 20% of their value in recent weeks amid concerns about weak global economic growth.

Kuwait oil minister Hani Abdulaziz Hussain, who is considered one of the group's more consumer-friendly members, told reporters before the meeting that oil prices around $100 a barrel are "acceptable and reasonable" and that the group could meet again if oil prices slip below $90 a barrel.

Light, sweet crude oil for July delivery on the New York Mercantile Exchange settled 1.6%, or $1.29 a barrel, higher at $83.91 a barrel, the highest level since Friday. The rally was spurred by fresh hopes of a new move by the Federal Reserve to stimulate the U.S. economy.

ICE July Brent crude oil expired down 10 cents at the settlement, at $97.03 a barrel.

--Benoit Faucon and Nicole Lundeen in Vienna and David Bird in New York contributed to this article

Write to Hassan Hafidh at hassan.hafidh@dowjones.com, James Herron at james.herron@dowjones.com and Summer Said at summer.said@dowjones.com

(END) Dow Jones Newswires

14-06-12 2032GMT