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Opec to hold steady due to Angola excess.

Byline: LONDON:

Increased oil output to a year-high from Opec's president Angola, flouting agreed limits, has helped stack the odds against any formal change when the producer group meets in September. Without a sharp slide in crude prices the Organization of the Petroleum Exporting Countries is likely to leave its output targets unchanged when it meets on September 9, most Opec delegates and analysts said. Within the group, supply has been rising. Angola has raised its exports schedule in October to the highest since December, trade sources said, adding to a breach of output limits by other members such as Iran. "As long as it does not affect prices, people can still hug each other and smile and say everything is going well. But if it bites into revenues, then people would be making much louder noises," one Opec delegate said. Opec's deal last year to cut output by 4.2 million barrels per day (mbpd), or 5 per cent of world demand, has helped prices rally, as has a rise in equities, driven by expectations of economic recovery. Reports this month by three leading forecasters -- the International Energy Agency (IEA), the US government's Energy Information Administration and Opec -- all hinted at the need for more Opec discipline. "We believe that the supply and demand fundamentals suggest that they must get a bit more crude off the market," said Adam Sieminski of Deutsche Bank. "In the past, it has been easier for the ministers to agree to change the official targets than to improve compliance on existing quotas. So, we may see a modest cut in the Opec ceilings." While Sieminski saw a cut in September as possible, other analysts said that would lack credibility as long as Angola and others produced above target. Even a call for more respect of targets could leave the market sceptical. "Why cut further if the cuts are not implemented in full?" asked Eugen Weinberg of Commerzbank. "Who is going to implement it, the Saudis again? Well, I think they will not be too glad and the rest would rather like to increase production at the current price levels." Opec's adherence to its output curbs reached around 80 per cent in March, viewed as an all-time high. But as oil rallied further, compliance has slipped to around 70 per cent.

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Publication:Oil & Gas News
Date:Aug 24, 2009
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