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December 22, 2009

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'No change' to oil output limits

OPEC producers are set to leave output limits unchanged at a meeting today, but look likely to call for improved compliance with existing curbs.

"For this meeting - no change," OPEC Secretary-General Abdullah al-Badri told reporters. "There is consensus that there is no change.

"If you look at the price, it is very comfortable. If you look at fundamentals, inventories they are on the high side. We have to work to bring them down to reasonable levels."

The Organization of the Petroleum Exporting Countries has not needed to alter its self-imposed output quotas since slashing supplies late last year to reverse a price crash as the world economy slid into recession.

"If the price had stayed below US$70 it might have put the wind up them. But it didn't go there, it is back in the US$70s so they will leave well alone," said Neil Atkinson, senior analyst with KBC Market Services.

Benchmark United States crude traded at US$73.30 a barrel yesterday, having slipped briefly below US$70 last week.

OPEC has no official price target but several countries, including leading producer Saudi Arabia, have called US$75 a fair price for both consumers and producers.

The only issue for ministers is likely to be the degree of adherence with existing supply curbs, which has weakened in recent months, allowing more oil onto the market.

"We would like to see always better compliance," said UAE Oil Minister Mohammed bin Dhaen al-Hamli.

"What I'll be requesting and I expect others to do also is for countries to observe their quota and not to flood the market with crude that there is no demand for," said Iraqi Oil Minister Hussain al-Shahristani.

The least compliant OPEC member is Angola. Targeted with a 240,000 bpd cut, Angola is pumping 320,000 bpd above its quota, according to a recent survey.


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