UPDATE 1-OPEC price hawks call on Saudi to cut oil output

Tue Jun 12, 2012 9:26am EDT

Related Topics

* Venezuela, Iran want OPEC to cut back to 30 mbpd

* Extra Saudi output has lifted OPEC to 31.6 mbpd

* OPEC report forecasts H2 demand for its oil at 30.7 mbpd (updates throughout)

By Alex Lawler and Amena Bakr

VIENNA, June 12 (Reuters) - OPEC's price hawks on Tuesday called on Saudi Arabia to rein in excess production to stem a slide in oil prices that has knocked $30 a barrel off crude since March.

"We are going to make a very strong call in the meeting that the countries that are over-producing cut," said Venezuelan Oil Minister Rafael Ramirez.

Saudi Arabia has lifted output to 10 million barrels daily, its highest in decades, to help nurse sickly global economic growth in what Saudi Oil Minister Ali al-Naimi has called a "type of stimulus" for the economy.

That has taken supply from the Organization of the Petroleum Exporting Countries to 31.6 million barrels a day in May, an OPEC report said on Tuesday, well above the official 30-million-bpd target it set in December.

That has riled the price hawks in OPEC, many of whom require more than $100 crude to balance national budgets.

Oil has fallen from near $128 a barrel for Brent crude in March to trade at less than $98 on Tuesday.

"We think we need to keep the ceiling on production of 30 million that was agreed at our last meeting in December," said Ramirez.

"The first and most important issue is we agree to stick to the 30 million," agreed Iran's OPEC governor Mohammad Ali Khatibi. Iraq too has said OPEC is pumping too much.

Its oil output curbed by U.S. and European sanctions, Iran has grown increasingly irritated that its regional Middle East rival Saudi Arabia has lifted supply at its expense.

Iranian output is at a 2-year low just above 3 million bpd.

Riyadh on Monday risked inflaming relations with Tehran by suggesting OPEC might need to lift its output target to match demand in the second half of the year.

But it appeared to back away from that position on Tuesday, making it most likely the group will leave supply policy unchanged.

Saudi Oil Minister Ali al-Naimi told reporters he was "happy with the way things are."

But Riyadh may need to go further than that and reduce output quite sharply if it wants to prevent a further build in global oil inventories.

Signs are it has already started, pumping 9.8 million bpd in May from 10.1 million in April, according to the data it submits to OPEC.

OPEC's in-house experts say demand for fuel is cooling and that current output levels are well in advance of demand for OPEC crude in the second half of the year.

"Signs appear to be showing that the global economy is slowing further," the group's Vienna-based secretariat said in a monthly report.

"The second half of the year could see a further easing in fundamentals, despite seasonally higher demand."

The report said demand for OPEC crude would average 30.74 million barrels per day in the second half of the year.

That would imply OPEC needs to slice nearly a million barrels daily from existing output levels if it wants to prevent inventories rising in the second half of the year.

Commercial stocks among OECD countries are forecast by the U.S. Energy Information Administration (EIA) to reach 2.64 billion barrels, or 57.3 days of forward cover, by the end of the year.

Because of a decline in oil consumption since 2007 that would be among the highest endofyear levels of forward supply cover in the OECD since 1991, the EIA says. (Editing by Richard Mably, William Hardy)

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