OPEC mulls oil supply target hike to calm prices

>SINGAPORE (Reuters) - OPEC is considering raising oil supply targets for the first time since 2007, a move that could weaken $100 oil prices that have dragged on global economic growth. The Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil, may raise supply targets by as much as 1.5 million barrels per day (bpd) when ministers meet on June 8, two Gulf oil sources told Reuters on Thursday."There is a need for an increase to replace the loss from Libya," one delegate said. "Oil prices are too high. $100 oil is scaring people."The most likely outcome would be for a rise of 1 million bpd: "That would be calming for prices," the delegate said.A rise of 1 million bpd in OPEC's output target would result in only a small increase in actual oil supply from the group, the delegate said. Part of the rise would simply absorb above-target supply that some members were already pumping, the delegate added.The 11 members bound by OPEC production targets -- all except Iraq -- pumped 26.23 million bpd in May, nearly 1.4 million bpd above their 24.84 million bpd target. <OPEC/O>Top oil exporter Saudi Arabia boosted oil supply in February to plug the gap left by Libya, then reduced supply again in March, citing a lack of demand.OPEC has taken no formal decision to supply more oil to compensate for Libya's supply disruption or to ease prices.MEANINGLESS?"If this is 1 million bpd on top of the targets from over two years ago, then it's meaningless. If it's 1 million bpd above current production levels, then it's exactly what the market needs," said David Wech, analyst at JBC Energy in Vienna.Raising formal output targets would force OPEC to confront tough issues. Saudi Arabia holds most of the group's spare capacity so is likely produce most of any extra oil supply.Saudi energy minister Ali Al-Naimi said the country would lift production if there was demand for more crude.Other members would also want a share of any rise in supply targets, even if they were already at full capacity.OPEC members Iran, Libya and Venezuela could resist any rise in targets, industry publication Energy Intelligence reported on Wednesday, citing an OPEC insider.Iranian OPEC governor Mohammad Ali Khatibi declined to comment on whether the group would agree to boost production,"We will discuss it in the next meeting," Khatibi said at a gas exporters group meeting in Cairo. "We should see all fundamentals ... all indicators."Algeria's energy minister said he did not expect OPEC to raise output at its meeting in Vienna."I do not think so," Energy and Mines Minister Youcef Yousfi said. [ID:nWEA4415] "We will discuss the matter but I don't think we will be increasing production."Wilson Pastor, oil minister of Ecuador, OPEC's smallest member, said no decision has been made but the group could lift output quotas if they see evidence of a supply short-fall."If there is a need for some countries to pump more they'll do so if the market is under-supplied," Pastor told Reuters."Let's see what happens in Vienna regarding the market analysis we'll do and we'll make a decision."Libya, whose top oil official recently defected, would not want other OPEC members to divide officially its share of the targets, the delegate said. Civil war has cut its exports.Another delegate saw no need for a formal change and said members could simply flout official targets to meet demand."Why bother?" he said. "Everybody is pumping what they want anyway and getting the money they want and more."Oil prices were firmer on Thursday with Brent crude up 35 cents at $114.88 a barrel at 11:03 am EDT (1503 GMT).Brent has traded above $100 since early February, prompting consuming governments to warn that high oil prices can drag economies still fragile after the global financial crisis.SOOTHING CONCERNSThe West's energy watchdog, the International Energy Agency, last month urged producers to boost supplies to protect the economic recovery.Data this week from top oil consumer the United States has exacerbated concerns that the recovery in the world's largest economy is running out of steam.Factory output growth is also slowing in China, engine of global demand growth for more than a decade.Fuel costs are only part of a long list of economic concerns, the delegate said: "Some of it is the oil price, but that is not the whole story."Even a little extra oil on the market could soothe concerns over Libyan supply and high fuel costs, JP Morgan oil analyst Lawrence Eagles said."This would be a positive policy step as far as consuming countries are concerned," Eagles said.Saudi Arabia and other Gulf producers are wary of the impact high oil prices might have on the economy and on demand. As recently as February, Saudi Oil Minister Ali al-Naimi said a $70-$80 per barrel was fair to both producers and consumers.A slightly wider range of $70-$90 per barrel would still be good for both, an OPEC delegate said on Thursday.Saudi Arabia's revenue needs have risen as it has offered $130 billion in handouts to avoid any chance of the sort of unrest that has rocked much of the Arab world.OPEC has kept formal supply policy unchanged since late 2008, when the group agreed record cuts to match the sharp fall in demand as the financial crisis engulfed the global economy.(Additional reporting by Santiago Silva in Quito, Edmund Blair in Cairo, Amena Bakr in Vienna and David Sheppard in New York; editing by Christopher Johnson, Alison Birrane, Daniel Fineren and David Gregorio)