The Organisation of Petroleum Exporting Countries (Opec) appeared poised today to hold oil production quotas unchanged, with its ministers voicing satisfaction with current global crude prices. Instead, the focus at the organisation’s meeting in Vienna was on persuading members not to sell more oil than their quotas permit.
Kuwait’s oil minister, Sheik Ahmed Al Abullah Al Sabah, said Opec’s markets monitoring committee would suggest to the 12-country group that oil output targets be held steady at the organisation’s meeting today in Vienna.
The recommendation offered further indication that ministers from the bloc, supplier of roughly 35 per cent of the world’s crude, has been turning their aim towards encouraging member discipline. Compliance with the output limits, which are designed to support prices, has been waning.
Prices are now roughly double their levels from December, when Opec announced its record 4.2 million barrel per day cuts from September 2008-level. The price rally has not only been a welcome piece of news for cash-hungry member governments, but also a temptation to sell more oil. US benchmark light sweet crude for October delivery was hovering at around $71 in electronic trading on the New York Mercantile Exchange. The level is well within the range that Opec kingpin Saudi Arabia has said it would like to see.
Saudi Arabian Oil Minister Ali Naimi, whose country is Opec’s top producer and most influential member, said on Tuesday that crude’s current prices “is good for everybody — consumers and producers.”
His satisfaction was echoed by other Opec ministers ahead of the meeting, who also pointed to indications of a nascent global economic recovery after the world’s worst recession in decades destroyed demand for crude, the chief foreign revenue source for the majority of Opec’s members.
“The economy seems to be doing ok,” Algerian Oil Minister Chakib Khelil said, echoing other ministers. “Things look all right. Prices are holding.” But even as he acknowledged that “lots of uncertainties remain,” Khelil said the careful implementation of the group’s last round of output cuts will help stabilise the market within the next six months.
“All we need to do is comply with what we have decided to do,” he said. Adhering to those quotas has typically been one of Opec’s chief weaknesses, but pivotal at a time when the group is leery of shocking the market with a sharp cut that could send prices surging and undercut any economic recovery.
With compliance down to around 70 per cent, the group can ill afford to look the other way at a time when global crude demand remains weak, oil inventories high, and major non-Opec producers like Russia showing little indication they are willing to do more than pay lip service to Opec’s calls for broader coordination on production.
