OPEC meet on crude output: What to expect

But supply from the 12 member group has been running nearly 2 million barrels per day , above a self imposed production sealing of 30 million barrels per day and is at it’s highest since 2008. The reason for this being, Extra Saudi output has lifted OPEC to 31.6 mbpd, OPEC is calling on Saudi Arabia to rein in excess production to stem a slide in oil prices.

Venezuelan Oil minister Rafael Ramirez said that a very strong call would be taken in the meeting scheduled on Thursday and over producing countries should cut their output.

Meanwhile, Iran's OPEC Governor Mohammad Ali Khatibi feels that the first and most important issue would be to agree to stick to the 30 mbpd limit. Iraq has also said that OPEC is pumping too much.

Amid these differences in opinion on oil production, Geoff King, oil futures editor at Platts outlines his expectations from this meeting. 

Below is the edited transcript of King’s interview with CNBC-TV18. Also watch the accompanying video.

Q: What do you make of what will likely take place on Thursday? Do you think that there might me as Saudi has been hinting since yesterday, an increase in production or do you think might be a cut back or a status quo?

A: What we got to realize is that Saudi haven’t actually said that they will want and increase in production, they said may be we should look at having an increase in production. I guess there are a few reasons behind that. You have got EU and US sanctions on Iran coming into effect at the end of this month since you are going to have a drop off of their production going into the market.

You have also got seasonal demand increase expected coming into the next quarter. So those are three factors that the Saudis are looking at when they say this. I just want to emphasize that they said may be we should consider and they are not actually calling for an increase at this stage.

Q: How much do you expect will be the cut in overall OPEC supply once the sanctions come in place and keeping in mind the fact that Iraq has been pumping more than anticipated?

A: It is very hard to tell until we get the actual numbers out. Obviously everything that is going into Europe is going to be cut, but then what's going into Asia, how much of that’s going to go and how much more oil is coming in from places like Iraq also needs to be seen. Until we get the numbers it’s impossible to tell.

Q: Do you believe that Saudi might go ahead with a probable increase in supply?

A: I think what we have seen over the last couple of months is when Saudi had some concerns they have gone ahead and done there own thing and raised production. They have argued that the markets asked for it so they put it out there, they have always said that when the market asks for extra oil they have got this capacity that they can bring on to the market. So the question a lot of the market is asking is how much of this so called 2.5 million barrel per day capacity that the Saudis have is actually real and how quickly can they bring on to the market.

Q: Give me a short to medium term outlook on where you see prices go keeping in mind the various different pulls and tugs and pushes that we have on prices from the macro economic picture to the crisis situation in Europe to the Greece elections, to the Spanish bailout and to the deteriorating data both in the US as well as the indicative slowdown in China. Are you expecting prices to continue to drop?

A: I guess the Saudi is the key thing here again as well. They have said that they would like to see prices around USD 100, they think that price is fair to keep economic growth occurring, while at the same time encouraging further production into the oil sector.  They have been successful over the last couple of months in bringing prices down to that level.

It’s a question now whether they can maintain that and like you said there are so many variables out there - there is this Iran sanction come into effect, we got GDP growth slowing in China and in India. We have got the eurozone crisis, this is the one thing that continuously is popping up and then there could be any other surprise around the corner.