OPEC oil deadlock to trigger more over-production
OPEC's decision to hold output levels means that the powerful 12-nation cartel is actually giving "implicit approval" to pumping more oil than its official quota target, according to analysts.
The Organization of Petroleum Exporting Countries (OPEC), which accounts for 40 percent of world oil, opted Tuesday to keep its official quota ceiling at 24.84 million barrels per day (mbpd), where it has stood since January 2009.
But OPEC is already pumping above its official limit to compensate for the loss of supplies from Libya, where unrest has ravaged supplies.
"This could be perceived as OPEC implicitly agreeing to continue to pump more than their quotas, by maintaining the status quo," said analyst Emma Pinnock at British energy consultancy Inenco.
"Saudi Arabia wanted to raise the quotas. Iran, Venezuela and Algeria wanted to maintain current levels," she said.
"The participants cannot agree on the quotas -- hence it suggests each country will continue in the meantime to act unilaterally, rather than as a organisation."
The decision sent world oil prices surging because market expectations had been for an output hike to cool high oil prices that are weighing on global economic growth.
In response, the International Energy Agency (IEA) urged OPEC producers to pump more anyway to avoid higher oil prices, while expressing its disappointment at the decision.
The IEA, which represents the interests of industrialised nations, estimates that actual OPEC production stood at 26.15 mbpd in April, giving an overshoot of about 1.3 mbpd.
The announcement has also exposed deep divisions within the OPEC cartel, with Kuwait, Saudi Arabia, Qatar and the United Arab Emirates calling for a hike.
Fellow members Algeria, Angola, Venezuela, Iraq, Iran and Libya all rejected such an increase.
Analyst Jason Schenker, at US-based Prestige Economics, said that the decision would not change a great deal.
"I think fundamentally it's not going to change the supply situation. I think Saudi Arabia is going to produce additional oil regardless."
"At the end of the day, for pricing: in the short-term this may be interpreted as bullish but the truth is that the market is going to be well supplied."
Questioned about whether unofficial production would rise as a result, he added: "Absolutely. Production is going up no matter what."
He added: "Quotas are basically suspended... each country is going to do whatever they see fit."
Unrest in OPEC member Libya, which erupted in February, has removed about 1.3 million barrels per day from the global oil market.
Cornelia Meyer, head of London-based MRL Corporation, agreed that unofficial production would remain above the output target.
"Unofficially production has gone up ... and we are sort of cheating by 1.5-2 million barrels, so they are fully producing and supplying the market," she said.
"But it would be good if the quotas went up a little bit, commensurately to what they are doing -- otherwise why do we have a quota?"