OPEC oil ministers are meeting in Vienna today and there is an expectation that they will set new production quotas to match the cartel’s current production levels. The existing quota sets production at 24.52 million barrels/day and was agreed to in 2008. Production in November topped 30 million barrels/day, as OPEC’s member nations sought to take advantage of prices hovering around $100/barrel.
A report yesterday that Iran would conduct naval maneuvers near the Strait of Hormuz sent crude prices up about 2.5%. The belief that OPEC will authorize a new, higher quota has taken more than half that gain back.
Saudi Arabia backs the higher quota, but Iran, Venezuela, and Algeria want to keep the quota lower and the price higher. The Saudis are concerned that prices in excess of $100/barrel will put additional pressure on the recovering global economy.
The struggle between Saudi Arabia and Iran for dominance in the cartel has been going on for as long as the cartel has existed, with the Saudis managing to maintain their pre-eminent role due to their position as the largest producer. The pecking order is not likely to change today.
The new quota will be applied to OPEC’s total production; individual country quotas are not expected to be adjusted.
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