June 2 (Bloomberg) -- Global oil supply needs to increase by 500,000 barrels to 1 million barrels a day in the next several months to meet demand, an oil official from a Middle East nation said six days before OPEC meets.
While members of the 12-nation Organization of Petroleum Exporting Countries agree more crude is needed, they have yet to decide whether to formally change production quotas, the OPEC delegate said today, declining to be identified by name because he is not authorized to speak publicly. OPEC pumped 28.9 million barrels a day last month, according to Bloomberg estimates.
“It is the easy option not to change quotas at this meeting, but to avoid doing so sends a strong message that spare capacity is low or that there is a desire for higher prices,” Lawrence Eagles, New York-based head of commodities research at JPMorgan Chase & Co., said by phone today. “On balance, lifting targets is politically the better option. However, higher targets and higher output do not necessarily go together.”
OPEC, which supplies 40 percent of the world’s oil, meets June 8 in Vienna to review output targets, after Brent crude gained 21 percent this year to over $114 a barrel. The group will probably maintain production levels, according to 27 of 30 analysts in a survey by Bloomberg News conducted May 24-31.
Oil producers including OPEC aren’t matching rising demand quick enough, leaving a shortfall in the third quarter, JPMorgan Chase said last month when the bank raised its 2011 Brent crude oil-price forecast to $120 a barrel from $110. Higher commodity prices are driving inflation, a headwind for manufacturing growth in China, Europe and the U.S.
July Brent crude futures fell 24 cents to $114.29 a barrel on London’s ICE Futures Europe exchange at 9:48 a.m.
Saudi Arabia, the world’s largest crude exporter and de- facto OPEC leader, will boost oil production to almost 10 million barrels a day this month, from “close to” 9 million barrels a day in May, to meet stronger demand from Asian refiners, consultants Petroleum Policy Intelligence said yesterday.
Another OPEC official from a different Middle Eastern nation said on May 17 that OPEC may increase production quotas because prices remain high, an option that wasn’t considered for the organization’s previous meeting in December.
OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is outside the quota system.
--With assistance from Grant Smith in London. Editors: Stephen Voss, Bruce Stanley
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