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| OPEC keeps production intact |
| Bloomberg / May 29, 2009, 00:39 IST |
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OPEC decided to keep production quotas unchanged at today’s meeting in Vienna, banking on a recovery in oil demand toward the end of the year.
The Organization of Petroleum Exporting Countries, responsible for 40 per cent of global crude supply, agreed to maintain production quotas, Saudi oil minister Ali al-Naimi said. It is the second time this year the 12-member group has met without revising that total.
Oil futures in New York have gained 42 per cent this year to more than $63 a barrel on speculation that demand will revive as the global economy starts to recover. That has increased revenue for OPEC members even as US inventories rose to a two-decade high last month.
“I don’t think there was any way they could justify cutting prices again, at $60 plus crude,” said Mike Wittner, head of oil research at Societe Generale SA in London. “If they can maintain discipline and limit the production creep that comes with higher prices, stocks should start to come down.”
Crude oil for July delivery traded up 4 cents at $63.49 a barrel in electronic trading on the New York Mercantile Exchange.
“Prices are good, the market is in good shape,” Naimi said as he left OPEC headquarters. The group’s next meeting will be on September. 9, he said.
OPEC’s choice not to cut further may have been influenced by its failure to complete previous reductions that came into effect at the start of the year.
The 11 nations bound by quotas, which exclude Iraq, pumped 25.81 million barrels a day in April, about 225,000 more than March and the first increase in nine months, according to OPEC’s latest monthly report. The countries have a total target of 24.845 million barrels. That means the group has completed 77 per cent of its cuts, down from a revised 82 per cent for March.
The outcome of today’s gathering is in keeping with a Bloomberg survey, in which 25 of 27 analysts said they expected existing quotas to be upheld.
“OPEC decided to keep quotas unchanged in order to help the global economy and this will help OPEC afterwards,” Algerian energy minister Chakib Khelil said after the meeting. “The price of $60 is not affecting the economy. There is plenty of supply.”
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