OPEC likely to keep output at present levels

A joint stance is key for an organization that likes to see itself as the oil market's chief regulator — and which wants to avoid a repeat of the June meeting. With Iran and its allies rejecting a Saudi push to increase output and make up for lost Libyan supply at that gathering, the result was a free for all.

Supported by other Gulf members, the Saudis, OPEC's petroleum powerhouse, upped their production. Others also ignored quotas. And OPEC was left looking foolish.

Coming into Wednesday's meeting, OPEC is exceeding its three-year old production ceiling by 11 percent, with the Saudis making up much of that overproduction. Their estimated 10 million barrels a day is a third of overall output — and the most they've pumped since August 1981, according to the Energy Information Administration.

Over the past six months, the Saudis increased production by about 1.3 million barrels a day. They are the only OPEC nation with such spare capacity — and their decision to up output and keep a lid on prices after the June meeting, convincingly demonstrated that they continue to set OPEC policy.

At least for now, however, the lesson that the Saudis rule on oil output appears to have been learned by Iran and Venezuela, like Tehran a vocal price hawk.

Iranian Oil Minister Rostam Quasemi said last week that supply and demand are in synch — although he added that he sees prices over $100 a barrel as fair. And he said he will accept whatever an OPEC advisory panel recommends. Those experts favor the status quo — daily production of around 30 million barrels.

Any decision Wednesday "will be decided by consensus," he told reporters Tuesday.

Analyst Phil Flynn said OPEC will be trying "to put on a good face by coming up with a new target that matches current overproduction, assuming the Iranians don't want to stand in the way."

He said "the Saudis have sent a strong message with their production prowess that when it comes to the Iranians, they are not going to take it anymore."

Venezuelan minister Rafael D. Ramirez remained pugnacious Tuesday, telling reporters Gulf countries "have to cut back."

At the same time, he suggested his country would follow Tehran's lead, saying, "we have a very good level of coordination with the Iranians."

Ehsan Ul-Haq, senior market consultant at KBC Energy Economics, said Iranian willingness to compromise reflects Tehran's recognition "that they cannot do anything if they continue to oppose what the Saudis would like to have."

The Saudis, in turn, are unlikely to press for any formal increase in output that would risk another abortive meeting.

In any case, they can up production unilaterally in case the world economy demands much more. But that is unlikely as long as the euro crisis continues to weigh on the global economy.

Oil prices opened below $98 a barrel Tuesday reflecting such concerns before rebounding to over $100.

Despite Tuesday's recovery, oil prices are around $3 a barrel down on last month as investors have worried over the economic fallout from Europe's debt crisis.

OPEC, in its monthly forecast issued Tuesday, said the world's expected appetite for crude would remain unchanged this year but predicted consumption next year would be down to a daily 88.9 million barrels — 100,000 barrels less than in its previous estimate.

It said the adjustment reflects slowing growth in industrialized countries, "which is expected to have spillover effects for China and India, and hence impact oil consumption over the coming year."

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Associated Press writers Adam Schreck in Dubai, Alex Kennedy in Singapore and Chris Kahn in New York contributed.