OPEC Maintains Oil Production Quota as Geopolitical Tensions Pressure Prices

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Organization of the Petroleum Exporting Countries (OPEC) has decided to maintain its 30 million-barrel-per-day (BBL/d) ceiling at a fifth consecutive meeting. After gathering at OPEC headquarters in Vienna, Austria, the delegates from 12 member countries agreed to take steps, if needed, to ensure a global market balance.

"Member countries reiterated their willingness to firmly respond to developments that might jeopardize oil market stability," the cartel said in a statement after the meeting. OPEC produces about one-third of the world's crude.

There was some speculation that OPEC might have chosen to boost output to offset the shortfalls of Libyan and Iranian output. In the middle of May, the International Energy Agency called on OPEC to significantly increase production, from 30 million to 30.7 million BBL/d.

Libyan output has fallen to about one-tenth of its pre-conflict levels. "If key oil fields can be brought back into production, Libya could get to 700,000 BBL/d in two months," said Samir Salem Kamal, Libya's OPEC delegate said in the sidelines of OPEC meeting, according to Platts.

Asked what Libya expected to produce in 2014, Kamal said that the country's target for 2014 had been 1.4 million BBL/d. If Iran does not reach agreement on its nuclear program by the end of next month, trade sanctions that were lifted last year will be re-applied.

Meanwhile, Islamist militants in Iraq seized control of the city of Mosul. As the clashes between Islamic State of Iraq and Al-Shams (ISIS) and Iraqi security forces continued, Saddam Hussein's hometown of Tikrit also fell to militants. ISIS has gained strength from the civil war in Syria, from which it has been transferring recruits and weapons to fight in Iraq since 2012.

"A big question for the oil sector in Iraq is whether extremist groups will seek to expand their attacks from the Kirkuk-Ceyhan pipeline to other energy infrastructure," said Helima Croft, a senior commodities analyst at Barclays Capital in New York. Prices for the Brent July contract rose 0.4% to $109.95 per barrel on the ICE Futures Europe exchange after Islamist militants seized two cities in Iraq.

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