Vienna: OPEC, supplier of 41% of the world’s oil, agreed to stick to its previous target for cutting production to keep crude prices close to $60 a barrel.
The group made a “very strong commitment” that it will continue to comply with existing output quotas, Qatari Oil Minister Abdullah bin Hamad al-Attiyah told reporters after a meeting here on 16 March. The Organization of Petroleum Exporting Countries called on members to make good on previous pledges to reduce supply by 1.7 million barrels a day.
Oil for April delivery was little changed at $58.18 a barrel at 11:07 a.m. on the New York Mercantile Exchange following the decision. Supply cuts already implemented have helped oil prices rebound from a 20-month low on 18 January, along with tensions between the US and Iran over the Islamic Republic’s nuclear research programme.
“Prices are moving in a range that they are comfortable with,” Sarah Emerson, managing director of Energy Security Analysis Inc., a Wakefield, Massachusetts, consulting firm, said earlier. “They haven’t finished making their February cutbacks, so there is no reason to announce more.”
The 10 OPEC members subject to production limits have carried out about 60% of the cutbacks they agreed to at meetings in October in Doha, Qatar, and December in Abuja, Nigeria, Bloomberg estimates show. The second part of those cutbacks started last month.
Those 10 pumped about 26.5 million barrels a day in February, according to the estimates, compared with their target of 25.8 million barrels a day. Iraq, and the group’s newest member, Angola, remain exempt from OPEC output targets.
OPEC members, which stand to produce about $620 billion worth of oil at current prices, may need to boost exports later this year should inventories continue to fall, the International Energy Agency, a watchdog for consuming nations, said two days ago. The agency said stockpiles in industrialized countries are headed for their biggest first-quarter decline in 10 years because of OPEC supply cuts and cold February weather.
“With inventories falling, my concern is we may see a shortfall when demand is picking up later in the year,” John Hall, managing director of UK-based energy consulting firm John Hall Associates, who observed the OPEC meeting, said in an interview.
“OPEC thinks short term,” based on prices, Hall said. “If it did comply strictly with cutbacks, that would make the supply-demand balance tight and push prices up. They can’t say now that they will boost output but that’s what they should be looking at. They should have a longer term plan.”
The group’s task is being complicated by the threat to supplies from tension in the Middle East and the prospect of falling demand in the US, the world’s biggest energy user, if its economy slows.
OPEC President Mohamed bin Dhaen al-Hamli, who is also the oil minister of the United Arab Emirates, expressed concern about the dollar’s drop. Qatar’s al-Attiyah said earlier he was “very worried” about the possibility of a US recession.
In a monthly report released today, OPEC raised its forecast for 2007 demand because of cold winter weather in North America and at the same time warned of “downside risks” to economic growth.
OPEC expects world oil demand to average 85.5 million barrels a day this year. That compares with an estimate of 85.37 million barrels a day in its last report.
The US and Iran, the second-biggest producer in OPEC, are at odds over Tehran’s nuclear programme. Iran says the research is to generate electricity, while the US and European countries including the UK and France have said they are concerned the country may be engaged in weapons development.