Things seem to be getting back to mere fundamentals — earlier than one had anticipated. Issues such as global crude output, consumption and inventory in major OECD markets are back in the lead. How orderly is the OPEC as markets continue to test and tease. Non-fundamentals, such as the report earlier in the week of an extremist threat to the Saudi oil infrastructure — especially the world’s largest oil terminal, Ras Tanura, and the refinery in Bahrain helped nudge up the crude markets by a dollar or two, but that was temporary and as soon as the threat level subsided, crude lost the gains.

With a capacity of six million barrels a day, any threat to Ras Tanura could not have been taken lightly for it handles roughly two-third of Saudi oil exports. Any disruption, even if small, could have hit the raw sentiments of the crude market. This is serious business and could not be left to chances.

The Saudis were indeed extremely prepared to handle any eventuality within their territory. They have proven it before too, when early this year in February an attempt was made by extremists to blow up the Abqaiq refinery. The attempt was thwarted and the perpetrators could not even get anywhere near the complex.

Coalition maritime forces present in and around the region were also geared up to take care of the international waters. However, the scare itself was enough to firm up the otherwise falling markets somewhat.

In the meantime, leading OPEC players were already showing their resolve in safeguarding their interests. Saudi Arabia had already told its customers during the Eid holidays of cut in its shipment to major customers in the US and Asia. Others were also not far behind. Analysts were anticipating some reluctance from Iran in this case as it along with some other OPEC members was producing beneath its allocated quota — due to infrastructure related problems. Iran’s OPEC quota is 4.11 million bpd but its actual output in September, according to an OPEC report, was 3.875 million bpd.

Iran along with some other hawks, including Venezuela, have been arguing for a quota based cut in output. That would have left Iran’s output at the current levels. While there were others, including Saudi Arabia, who reportedly were demanding an output cut based on current output to have any real sense. Ultimately it was decided — behind closed doors in Doha — to go for cut in output based on current production. If the scheme had to succeed every one was required to contribute to the cut in output.

The cuts once fully implemented were aimed at reducing the OPEC’s actual production to 26.3 million bpd from 27.5 million bpd — below the official OPEC quota of 28 million bpd, in place since July 2005.

Due to apparent argument and counter arguments, behind closed doors in Doha on the issue, there were some who were anticipating OPEC would not implement the output cut decision. But OPEC went ahead with it.

After Saudi Arabia, Iran also made the announcement it would cut its output as was required under the Doha deal. Iran’s oil exports is to drop by 176,000 bpd. the share of the deal to cut output, Iran’s oil minister announced giving a boost to the market.

“This amount will be from the actual production of the country and considering the fact that domestic consumption is fixed, Iran’s oil exports will decrease by this amount,” Oil Minister Kazem Vaziri-Hamaneh clarified in a press statement.

Libya and Kuwait also announced joining other members in the proposed output cut. Kuwait announced cutting its oil output by 100,000 bpd from Nov. 1, while Libya also vowed to implement a supply cut of 72,000 bpd from its normal production.

Despite the fact that markets have expressed its doubts, and despite maintaining steady shipments until late last month, Nigeria has also pledged to cut its output by 100,000 bpd. There could be other reasons why the Nigerians may not be able to fulfill their contractual obligations. The Niger Delta is faced with a number of problems. Oil production activities were disrupted last week at Anglo-Dutch giant Shell’s facilities and American oil giant ChevronTexaco facilities in parts of Nigeria. Youths of Kula in the Akuku Toru council area of the state were demanding better facilities to the people of the region where the oil facilities are located. Angry youths also occupied a gas plant owned by Italian oil giant, Agip, in the Ogba region of Rivers State in the Niger Delta for a few days before reaching an agreement with the authorities.

Markets are keeping a close eye on all these developments. Once OPEC proves beyond doubt it has the guts and the resolve to stand by its commitments, its writ would be established and then things could change dramatically. But in order to be there, a lot of distance still needs to be covered. The onus currently is on OPEC and its leaders, one has to emphasize. Markets are testing their resolve.

And in order to achieve its objective of what could be termed as ‘fair return’ some more belt tightening could also be required. Analysts feel OPEC may have to mop up some more crude from the market when it meets again in Abuja in December — if not before.