PREVIEW-Hamstrung OPEC to keep oil target unchanged

Peg Mackey and Alex Lawler
Reuters Middle East

* No change to 30 mln bpd output target seen at Dec. 12


* Middle East tension supporting oil prices

* Demand for OPEC oil to drop 400,000 bpd in 2013

* Gulf Arab countries to make any output changes informally

LONDON, Nov 29 (Reuters) - High oil stockpiles, slowing

demand growth and a fragile world economy would usually give

OPEC reason to consider supply cuts when it meets next month,

especially when some think they may be pumping more than enough

to meet demand.

But with turmoil in the Middle East keeping the price of oil

well into triple digits, OPEC delegates say the 12-member group

is expected to stick with an output target of 30 million barrels

per day (bpd) agreed a year ago.

They also hope the Organization of the Petroleum Exporting

Countries will contain tension over sanctions on Iran that have

seen Tehran's output plunge and led Saudi Arabia and Gulf Arab

allies Kuwait and the United Arab Emirates to turn up the taps.

Indications are that Iran, under tightening U.S. and

European sanctions over its nuclear work, is resigned to

dramatically lower exports and will fly under the radar at the

Dec. 12 meeting in Vienna.

"OPEC is facing a difficult year ahead. 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," said a senior

OPEC delegate from a Gulf producer.

"But political factors will prevent OPEC from taking any

formal action."

With changes in the output ceiling unlikely, oil market

management will be guided by OPEC's leading producer Saudi

Arabia - the only member with significant unused capacity -

supported by the UAE and Kuwait.

Riyadh has already pulled back from 30-year-high rates of 10

million barrels daily, pumping about 9.7 million bpd in October.

That has helped lower overall OPEC production by some 700,000

bpd from its peak earlier this year near 32 million bpd.

The numbers alone suggest OPEC's supply surplus could build

up next year and may indicate modest curbs are needed.

Oil inventories in industrialised countries have risen to

59.6 days of future demand in September, according to the

International Energy Agency, significantly above the fiveyear

average for the first time in 2012.

OPEC is pumping about 1 million bpd above the 30 million bpd

output ceiling. Demand for OPEC crude is set to drop next year

by just over 400,000 bpd as the United States, enjoying a shale

energy boom, and other non-member countries expand supplies.

But lower Iranian exports, oilfield outages from the North

Sea to Nigeria and concerns of wider disruption to Middle East

supply have outweighed lacklustre demand due to Europe's debt

crisis and a slowing Chinese economy, keeping oil above $100 a

barrel for most of 2012.

"You have tension in Gaza, Syria, Iran, Egypt - all over the

Middle East - that's keeping the price high," said a delegate

from another Gulf OPEC country.

"Is there an over-supply? Yes, there is. Do we want to keep

this over-supply for the time being? Yes we do, until things

become clearer."

Brent crude has averaged $111.89 so far this year,

putting it on course to exceed the record annual average of

$110.91 set in 2011, and well above Saudi Arabia's preferred

level of around $100.

"On the production front, it is going to be the same story -

keeping the 30 million bpd production level and the members will

basically produce what they want," said Paul Tossetti, senior

energy adviser at PFC Energy.

"The (Gulf) countries are producing at high levels and as

long as prices hold, why would they want to cut production?"


While many in OPEC appear relaxed about the market outlook,

there is tension under the surface.

Tehran was angered by a rise in Saudi output to 10 million

bpd earlier in 2012 that helped to cushion the impact of the

sanctions on Iran by helping to bring prices down from a 2012

high of $128 in March.

Iran, traditionally OPEC's second-largest producer, has seen

its output sink to around 2.7 million bpd, the lowest in two

decades. Iraq, benefitting from an expansion in export capacity,

has overtaken its long-time rival, as has Kuwait.

An Iranian oil official, asked if Iran was concerned about

other OPEC members taking its market share, indicated Tehran had

no stomach for a fight with Saudi Arabia and was not calling for

a cut in output.

"When I compare the different forecasters, they are

forecasting the same demand volume. Also the non-OPEC supply

will be about the same. Therefore it seems next year's market

situation will be about the same as this year," the official,

who declined to be identified, said.

The contrasting fortunes of Iran's and Iraq's oil

industries, as well as waning output in other members such as

Algeria are expected to hinder any move towards dividing OPEC's

30 million bpd target into individual shares, or quotas.

Ministers are also expected to try to appoint a secretary

general to replace the outgoing Abdullah al-Badri during talks

at OPEC's Vienna headquarters.

Badri, a Libyan, completes his term at the end of December.

Saudi Arabia, Iran and Iraq have appointed candidates to succeed

him, and the group has been deadlocked all year over who should

do so. The candidate from a fourth member, Ecuador, has

withdrawn, an OPEC source said.

In the absence of the needed consensus on a new candidate,

delegates have raised the possibility of temporary moves such as

rotating the job around the members for shorter terms, as used

in the past, or even asking Badri to stay on.

(Additional reporting by Amena Bakr in Dubai; Editing by Alison


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