OPEC agreed to keep oil production quotas unchanged, deciding against a further output cut that risked damaging the ailing global economy.
OPEC agreed to keep oil production quotas unchanged, deciding against a further output cut that risked damaging the ailing global economy. The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world"s crude oil, will aim to complete existing production cutbacks agreed late last year and meet again on May 28 to review policy. This decision of no new cut of production but instead fully compliance with current production quotas, was well expected from all the analysts and journalists which read the news and analysis, except of them who serve opportunistic and speculative interests. The signs that cartel members wouldn"t reduce their daily production in yesterday"s critical meeting in Vienna, were clear from the last days of the previous week, when the Saudis ?and their close allies- said in clear words that they preferred the full compliance with current quotas and a future cut of production in the near future if that is necessary, that means if oil prices continue to fall. ?We would like to see compliance as high as possible,? Ali al-Naimi, the oil minister for Saudi Arabia, the group"s biggest producer, told reporters when he arrived at his hotel in Vienna on Saturday. ?It is over 80 percent now, it can be better.?
The estimate of no new cut was transformed into sureness
The estimate of no new cut was transformed into sureness Friday night, when the international news agencies broadcasted that U.S. president Barack Obama telephoned King Abdullah of Saudi Arabia ahead of the meeting. According to the official statement they discussed international economic and security issues. But it was clear that president Obama asked Saudis ?their best, most powerful and most reliable ally in OPEC, not to cut the production again, as the world and especially U.S economy suffers the worst recession of the last 50 years.
The message was given and the results of oil producers meeting were sure. At his opening address to Meeting of the OPEC Conference, José Maria Botelho de Vasconcelos, Minister of Petroleum of Angola and President of the Conference made clear that OPEC members understand the difficulties in the world economy and is ready to help for the revival of the world economy. ?A high level of compliance with that decision has helped stabilize oil prices, although these are still at low levels. However, this has come at a time when many other leading sectors of the global economy have continued to weaken, sometimes dramatically. Without any doubt, we are living in exceptional times. Long-established practices and procedures in the world"s financial sector are breaking down. On top of this, there is the major downturn in the real economy, intensified by the financial crisis. Despite the stringent efforts of authorities from around the world to handle this major crisis, the situation is still very fluid and the final outcome unclear. Crude oil prices are at levels that do not support sound investment strategies for the future. If this continues for much longer, the boom/bust cycles will continue for years to come. We would all suffer, if this happened ? producers and consumers alike. As we have always maintained, the responsibility for ensuring stability in the oil market is a collective one involving all producers ? OPEC and non-OPEC alike ? as well as consumers? said OPEC official in a ?very soft? speech ahead of such a critical meeting, endin his speech by warning that ?OPEC must not be expected to shoulder the burden alone?.
After some hours came the official confirmation of a widely expected decision. OPEC members decided not to cut again their daily oil production as they"ve understood that, in the medium term, the danger to the global economy was greater than the danger of high inventories. Algerian Oil Minister Chakib Khelil, who had argued for another cutback prior to the meeting, said afterwards that all OPEC members will make an ?extra effort? to comply with the existing cutbacks. He admitted that oil prices will not rise a lot from today"s (yesterday"s) decision.
We must underline that most members of the 12-nation organization have been clear in favoring reduced output in the days preceding Sunday's full meeting.
Still they were leaving open whether they want to lower output quotas - or if they favor a solution less likely to hurt the struggling global economy by seeking to end overproduction by some nations above levels allotted to them. But every cartel, organization, political party, eves a company, has a leader and for OPEC the leader is Saudi Arabia. Or, if you prefer, the United States.