OPEC decided to increase its production ceiling to 30 million barrels a day, the first change in three years, moving the group's target nearer to current output as it grapples with rising exports from post-war Libya.
The new quota is for all members of the Organization of Petroleum Exporting Countries, including Iraq and Libya, and compares with actual November production from those 12 nations of 30.37 million barrels a day, according to OPEC estimates. The target will be reviewed at its next meeting on June 14 and replaces a previous target for 11 OPEC nations, excluding Iraq, of 24.845 million.
"We have an agreement to maintain the market in balance and we're going to adjust the level of production of each country to open space for Libyan production," Venezuelan Energy Minister Rafael Ramirez said in Vienna after OPEC's conference ended today.
OPEC is raising its quota to more closely match current production while at the same time gauging the possibility of a slowing global economy and rising Libyan supply. Its last meeting in June broke up without consensus when six members including Iran and Venezuela opposed a formal push to pump more oil. Saudi Arabia and other Gulf nations went ahead anyway and increased supply to make up for halted Libyan exports.
David Fuller's view This is not an actual production increase but it more closely matches the output from OPEC that is currently taking place. Extra 'leakage' from the cartel has always been a factor. By raising the ceiling OPEC has left the door open for individual countries to further increase production, should they be able and willing to do so.
Given the Eurozone's economic slump, the USA's meagre expansion and declining GDP from growth economies, OPEC is willing to accept somewhat lower prices today in an attempt to head off a much bigger slump back towards $32 which we last saw in December 2008.
These are worrying economic times due to the Eurozone sovereign debt crisis and slowing global GDP growth. However, the all-important commodity price reset, which I have often mentioned, continues as you can also see from the Continuous Commodity Index (Old CRB) (historic, weekly & daily). No aspect of this is more important than lower oil prices (Brent & WTI) in terms of reducing global inflationary pressures. This is a prerequisite for economic recovery over the medium to longer term.