Arguments stack up for steady Opec oil output

Oil above $60, accelerating demand growth and falling fuel stocks in consumer nations are likely to push Opec to keep output steady when it meets on Thursday.

In fact some analysts say the group's next change to production levels, some time later in 2007, may well be to the upside.

"There is little fundamental argument for a cut now. Oil prices are on a rising trajectory and market balances are tightening," said Paul Horsnell, an analyst at Barclays Capital. "If anything, Opec should be starting to think about increasing production later in the year." The International Energy Agency, the US government and Opec itself see global oil demand picking up by more than one million barrels per day to around 86 million bpd this year, with the biggest increases expected in the third and fourth quarters.

Even the most conservative projection, Opec's own, puts demand for Opec oil at above 30 million bpd. That number includes Iraq and new member Angola, both of which are exempt from output restrictions for the time being.

A majority in Opec, including top oil exporter Saudi Arabia, have said - barring a price collapse - they prefer to stick with an output target of 25.8 million bpd for the other 10 members when the group meets in Vienna on Thursday.

"With the market going the way it is, I don't think that we need to cut," Opec's head of research, Hasan Qabazard, said recently.

At its previous two meetings, in October and December, Opec agreed to remove a total 1.7 million bpd, or roughly six percent of production, from the market. The organization has so far delivered one million bpd of the reductions.

"If we are able to improve the percentage of the cut, this will do the trick," Abdullah al-Badri, Opec's new Secretary-General recently told Reuters.