OPEC set for easy oil deal, secretary-general dispute

VIENNA Tue Dec 11, 2012 2:34am EST

VIENNA (Reuters) - OPEC's oil exporters look set this week to avoid a quarrel about how much crude they produce and argue instead about who should be the group's next secretary-general.

Oil prices are roughly where OPEC wants them - comfortably above $100 a barrel - but there is deadlock over who should replace Libyan Abdullah El-Badri as the public face of the organization.

At a meeting in Vienna on Wednesday the 12-member Organization of the Petroleum Exporting Countries is widely expected to retain its 30 million barrel a day (bpd) output target for the first six months of 2013.

"The world economy is weak and supply will be running ahead of demand, which could justify a cut of around 500,000 barrels a day, but political factors will prevent OPEC from taking any formal action," said a senior OPEC delegate from a Gulf producer, referring to Middle East unrest and sanctions on Iran.

"At current prices there is little incentive to change either the 30 million OPEC-wide production target or to reduce actual production, running around 31.0 million," said Washington consultancy PFC Energy.

OPEC's own maths suggest that, despite oil prices at a lofty $107 a barrel, it is pumping more than world markets need - pointing to a potential stockbuild and the possibility of a fall in prices at the start of next year.

Experts meeting on Monday at OPEC headquarters in Vienna agreed that demand for OPEC crude in 2013 would average 29.7 million bpd, suggesting current output will build stocks by 1.3 million bpd on the 90 million bpd world market.

Oil inventories in industrialized OECD countries have risen to nearly 59.6 days of future demand, according to the International Energy Agency, significantly above the five‐year average for the first time in 2012.

That may spur OPEC's price hawks - Iran, Algeria and Venezuela - to seek an assurance from Saudi Arabia, the biggest exporter, that it will trim output should prices fall below $100 a barrel.

"Many countries have used $100 for their budgets so I think the price now is good for us," said Iraqi Oil Minister Abdul-Kareem Luaibi.

Saudi Arabia has filled the one-million-bpd gap left by sanctions against Iran's nuclear program that have sliced exports in half, so Riyadh would be expected to cut first in the event prices take a dive.

While agreement on output policy looks straightforward, a decision on who to appoint secretary-general does not.

Candidates from Iran, Iraq and Saudi Arabia are competing to replace the 72-year old Libyan Abdullah al-Badri, who has been in the job 5 years.

Election requires a unanimous vote but rivalry between Saudi on the one hand and Iran and Iraq on the other reflects political divisions between those countries.

That is likely, said OPEC delegates, to leave al-Badri in the job for another 6 months.

"This is a difficult situation," said Iraqi oil minister Luaibi. "It is dangerous for the future of the organization. This condition might affect the oil markets, I want all the members to understand this danger."

The candidates are Saudi Arabia's OPEC governor Majid Al-Moneef, former Iranian oil minister Gholam Hossein Nozari and Thamir Ghadhban the energy adviser to Iraq's prime minister.

(Additional reporting by Amena Bakr, Peg Mackey, Emma Farge. Editing by Richard Mably and William Hardy)

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