A suspension of OPEC production quotas is an option that could be discussed at a ministerial meeting of the cartel in Beirut next week, a source close to OPEC said.
“Suspending the quotas could be one of the options available to the organization to send a strong message to the markets that OPEC is doing something real thing to curb oil prices,” he said.
“OPEC has not ruled out any possible alternative to calm the oil market and curb the oil price. If it takes suspending the quotas, OPEC will seriously consider that. But nothing has been actually discussed formally,” the source said.
His comments were in line with a report Friday in the Wall Street Journal’s European edition.
Oil prices have shot up to historic highs in the last few weeks.
The Journal said producers in the Organization of Petroleum Exporting Countries could allow each member to put as much oil as it wanted on the market, which would in effect mean a suspension of the output quota mechanism, in order to bring prices back down below 40 dollars a barrel.
The source said that a suspension would not be significantly different from a straightforward increase of production quotas, which total 23.5 million barrels per day, and should not cause any upset, the source argued. “Our commitment has not changed and it will never change. We have a mission, we have a clear vision and a clear mission. We need to stabilize the oil market, stability is in our interest and in the interest of the entire global community.”
The organization was likely to consider increasing its quota ceiling by 2.0 to 2.5 mbd. “If that’s what the market needs to put the lid on the high oil prices, so be it,” he commented. “All of this will be the subject of discussion during the market monitoring committee (meeting) on Wednesday evening.” However, he added: “I’m sure they will discuss that option and other options. I’m not saying it has been ruled out, we do not rule out any practical and working solutions.”
The full OPEC session will be held on Thursday, June 3, in the Lebanese capital. On Thursday of this week OPEC President Purnomo Yusgiantoro of Indonesia mentioned three options but did not refer to a suspension of quotas.
The first was to increase quotas by 2.0 mbd, which would not increase supply, the second to increase by 2.3 mbd, which would authorize production beyond quotas that are already in effect, and the third to increase quotas significantly.
The Journal reported that a suspension of quotas could be matched by a significant increase in the targeted price range of 22.0-28.0 dollars per barrel.
Many OPEC members have been calling for this for months to compensate for a fall of the value of the dollar.
