OPEC ministers keep output unchanged
Minister of Petroleum and Mineral Resources Ali Al-Naimi, center, with Chakib Khelil of Algeria, Hussain Al-Shahristani of Iraq, head of Libya's OPEC delegation Shokri Ghanem, Sheikh Ahmad Al-Abdullah Al-Sabah of Kuwait, Germanico Pinto of Equador and Abdullah bin Hamad Al-Attiyah of Qatar at the opening of OPEC's new headquarters in Vienna, on Wednesday. (EPA)
Published: Mar 18, 2010 00:39 Updated: Mar 18, 2010 00:39
VIENNA: OPEC ministers agreed not to change oil output targets they are already exceeding, anticipating that demand will pick up later in the year to mop up extra barrels the producers may pump.
But with economic recovery still fragile as powerhouse China considers curbs on credit, OPEC did make an attempt to press members on Wednesday over adherence to production levels set in December 2008 to keep supply at 24.84 million barrels per day (bpd).
"We tried to push but not that much" on compliance with targets, OPEC Secretary-General Abdullah Al-Badri told a news conference. "We think the situation with the world economy and oil price make it a comfortable situation for everybody." Al-Badri said the producers would next meet on Oct. 14 in Vienna, pushing back slightly from the usual September slot.
"Good demand, reliable supply, beautiful prices - we are very happy," Minister of Petroleum and Mineral Resources Ali Al-Naimi said.
Benchmark crude futures traded at over $82 per barrel - in the area that OPEC's biggest exporter considers appealing to both consumers and producers alike, despite overproduction by OPEC.
A nascent recovery in the global economy in the last year and rising prices have encouraged revenue-hungry OPEC members to pump more oil and in February they were making just 53 percent of promised cuts of 4.2 million bpd.
"Everything is relative - if there was no demand there would be no leakage," said Al-Naimi.
The Kingdom has plenty of spare capacity which makes it the most flexible member of the group to meet consumption changes.
OPEC as a whole has more than 6 million bpd of spare capacity to satisfy rising demand if needed, Al-Badri said.
Around 4.4 million bpd of that is in Saudi Arabia, according to Reuters estimates.
Al-Naimi said he expected world oil demand in the second half of this year to grow by "about a million" bpd, adding he thought growth would be mainly from Asia.
"The implied situation is that we can go to zero compliance and then we'll have Saudi Arabia as a swing producer," said Olivier Jakob at Petromatrix.
In addition, governments must work out the delicate question of when and how to undo huge packages of support and incentives put in place to ensure economies survived global financial turmoil as tentative growth returns and worries over inflation emerge.
"While there has been improvement in the oil market outlook in recent months, there is still a long way to go before we can feel at ease with the situation," OPEC President Germanico Pinto said in a speech before the meeting started.
"The issue of exit strategies from stimulus packages of a year ago and the right timing of adjustment is becoming a key factor in the recovery of prices," he added.
Al-Badri said OPEC's biggest concern this year is how governments handle those stimulus packages.
"OPEC is responding to growth in the same way central banks are, in some way. They don't want to move until a nascent expansion turns into a more solid expansion, they don't want to raise production too soon," said Jason Schenker, president of Prestige Economics.
Ministers have said there should be no need for any extra OPEC meetings this year and the October appointment is safely after the traditionally weak second quarter when prices could fall, putting pressure on members pumping excess.
"The problem is, we are heading into the second quarter, when demand normally falls and inventory builds up. So the current level of OPEC supply may cause oversupply," said Carsten Fritsch, analyst at Commerzbank.
"There is a risk that oil prices will go lower," he added.
OPEC will also meet in Quito, capital of the president Ecuador, in the second or third week of December.
Oil rose above $82 a barrel on Wednesday, rallying to within $2 of this year's high on a recovery in demand in the United States and as OPEC decided to leave output targets unchanged.
Data from the US Energy Information Administration (EIA) on Wednesday showed oil product demand in the world's largest energy consumer was up 3.5 percent last week from a year ago.
A 1.7 million-barrel drop in gasoline stocks and a 1.4 million-barrel drop in heating oil stocks was partly offset by a 1.1 million-barrel rise in crude oil inventories.
US crude for April delivery gained 89 cents to trade at $82.59 a barrel by 2:02 p.m. EDT after settling up $1.90 Tuesday. London Brent crude rose $1.06 to $81.59 having earlier hit a two-month high of $81.72.
