OPEC's own outages delay day of reckoning on new supply curbs

By Alex Lawler and Georgina Prodhan VIENNA (Reuters) - OPEC is perhaps fortunate that the misfortune of some of its own members will make a production policy meeting this week a straightforward affair. The Organization of the Petroleum Exporting Countries might have had to take action to prop up oil prices in the face of fast-rising supplies from the United States if several in the cartel weren't pumping well below par because of civil strife or sanctions. Iran, Libya, Nigeria and Iraq of the 12-member group account for almost 3 million barrels per day of supply outage on the 90 million bpd world market. Iran and Libya are both pumping about one million bpd below capacity because of sanctions and civil protests respectively. Oil theft in Nigeria is depressing output by 350,000 bpd and infrastructure and security issues cost Iraq about 500,000 bpd in October. The losses have delayed OPEC's day of reckoning on having to reduce its 30 million bpd production target if it wants to keep oil prices above $100 a barrel. That makes it a sure bet that it will leave its supply limit unchanged for the first half of 2014. "The market is in the best situation it can be, demand is great, economic growth is improving," Saudi Oil Minister Ali al-Naimi told reporters on his arrival in Vienna. Oil now at $110 a barrel for Brent crude, is the "right price," he said. OPEC officials, privately, say they do not expect to see supply outages in Libya and Nigeria resolving themselves any time soon, or sanctions-hit Iranian crude exports rapidly increasing. But the group faces the start of a squeeze in market share in 2014 because of the boom in U.S. shale oil production, record post-Soviet output from Russia and rising output from Brazil and Kazakhstan. "Non-OPEC supply is growing at its fastest for many years," said Barclays in a note on Monday. "An overall expansion of around 1.5 million bpd for non-OPEC, the fastest in 30 years, looks likely in 2014. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global oil outages spike in October World demand falling for OPEC crude in 2014 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> Forecasters expect demand for the OPEC crude next year to fall by at least 500,000 bpd to 29.5 million. OPEC's own longer-term forecasts point to a continued fall in the medium term with one scenario indicating that despite growing world consumption, demand for its crude will slip to 28 million bpd by 2018. That outlook could deteriorate for OPEC should U.S. production continue rising in one million bpd annual increments as has been the case this year and last. Goldman Sachs expects that to happen every year to 2016, increasing U.S. production by five million bpd in five years to 14 million bpd. "The potential for global crude supply growth is greater than at any point in recent memory, leaving the outlook for oil prices clearly skewed to the downside over the next few years," said analysts at Morgan Stanley. But leading OPEC producer Saudi Arabia appears to be betting that shale is a short term phenomenon. "I don't think our decision makers are worried about U.S. oil shales which are unsustainable beyond a few years in any case for technical and geological reasons," said Sadad al-Husseini, a former top executive at Saudi Aramco. For the past two years, Saudi Arabia has balanced the world oil market and kept prices mostly in a $100-$120 range. Brent traded just short of $110 on Monday. "The market is fairly well balanced. If there is any tweaking of that, it is up to Saudi Arabia, Kuwait and the UAE," said Samuel Cizsuk of the Swedish Energy Agency. Saudi has already pulled back from record high output just above 10 million barrels daily to 9.75 million bpd in October. That helped lower OPEC production to 29.9 bpd from a peak this year near 30.6 million bpd. Should sanctions on Iran be lifted in full after its six-month interim nuclear deal, OPEC could be forced to negotiate a new round of supply curbs. "We will watch Iran closely," said an OPEC official. "When the time comes for them to recover lost production - no one can deny them that right." OPEC has been unable for years to agree individual country output quotas. While Saudi is prepared to trim supply informally the absence of quotas is not missed, but OPEC may need them again if it has to cut back heavily and share out reductions.