The realities of the global economic and financial slump have seen OPEC decide against further output cuts.
Instead, at a meeting in Vienna the group called on members to fully adhere to previously announced cuts of 4.2 million barrels a day.
So far OPEC’s compliance stands at nearly 80%, meaning the group needs to cut a further 800,000-900,000 barrels to get to full compliance.
The group agreed to meet again in May to reassess their policy, before a full summit in September.
OPEC’s 12 members have still to full reach the record output cuts decided last December.
The decision wasn’t a complete surprise, despite some members calling for a further cut of 500,000-1.5 million barrels a day.
Saudi Arabia, OPEC’s biggest producer, had argued in the lead up to the meeting, that the group needed to comply fully before pledging further cuts. Saudi Arabia has cut more than its quota.
Saudi Arabiasaid a new cut risked a price increase that could harm the economy, while Algeria’s Oil Minister Chakib Khelil had again argued for more output cuts.
The crude oil production target for 11 OPEC members bound by quotas is 24.85 million barrels a day, while actual output from those countries averaged 25.715 million barrels a day in February, according to an OPEC report published on Friday.
The report shows that while Saudi Arabia is the only member to cut more output than agreed last year. Iran, the second biggest producer and Nigeria have reached around half their promised reductions.
Iran and Nigeria, along with Venezuela are among the more financial strapped OPEC members.
OPEC already faces a 61% drop oil revenues this year as prices and production fall.
The meeting came after forecasts of falling oil demand and production this year.
Saturday’s meeting of the Group 20 finance Ministers in Britain didn’t provide any impetus for OPEC or anyone else to believe that there will be a concerted effort globally to try and lift the economies of the world out of recession by spending more.
The split between Europe and the US remains too great.
America wants to focus on growth, demand and the economy and Europe wants to focus on punishing the wrongdoers by tightening rules and regulations covering financial groups. Both are destined to fail.
China seems more interested in pressuring President Obama economically and strategically early in his term, while at the same time seeking domestically to deflect any blame from its people for the slowing economy to America.
All the talk of boosting the funds available for the International Monetary Fund, improving the lot of emerging economies and improving regulation was just talk.
The real decisions will come in the April 2 meeting of leaders from the G-20 countries.
Therefore the economic outlook is for more downward pressure on output and demand: meaning a weaker outlook for oil.
Algeria made the ritualistic call for more production cuts to drive up prices ($US75 a barrel seems to be the new ‘minimum); Saudi Arabia talked about cuts and making sure they stuck (but admitted that demand was falling); Venezuela again maintained its ‘hardline’ stance while figures suggested it was perhaps not as forthright in respecting production cuts.
On Friday, April Nymex oil futures eased 78 USc to finish at $US46.25 a barrel ahead of the OPEC meeting yesterday, while in London Brent crude fell 16 USc to $US44.93 on the ICE Futures exchange.
No one could pick the way OPEC members might vote, especially as it’s now clear there hasn’t been total compliance with previous cuts (the OPEC members were said to be ‘80% compliant’ by the organisation last week).
The recession and financial crunch are making it tougher for some members and non-members who want to work with OPEC (such as Russia) to trim output.
Every barrel cut doesn’t necessary contribute to higher prices when falling demand is crushing major consuming economies, like the US, Japan and China.
So some western oil analysts reckoned that OPEC would sit pat and do nothing this time and allow the slow members to bring production down to the 4.2 million barrels a day (bpd) cuts already in place, or reveal plans to cut more, once compliance was reached.
OPEC said in December it would slash production by more than 2 million bpd and world prices dropped more than 15% over the next three days.
The 12-member group’s reluctance to police the previous cuts (it has no sanctions anyway) is being complicated by demand seemingly falling faster than production.
Demand for oil and oil based products has been crunched by the recession, the global financial crunch, which removed investors and speculators, and by the slump in car sales around the world that was firstly triggered by last year’s record prices.
Last week the US Energy Department said global demand would fall more than expected this year.
The Department’s forecasting arm said it expected world oil consumption to average 84.27 million bpd in 2009, down 430,000 bpd from its previous monthly forecast and the lowest level since 2005.
And on Friday, two other forecasts supported that projection.
The International Energy Agency (IEA) released its latest outlook Friday, saying global oil demand in 2009 would drop for a second consecutive year for the first time since 1982-1983.
The IEA says demand will fall by 270,000 bpd to 84.4 million bpd – 1.5% down on a year earlier.
But more worrying was the warning from the IEA that the world will have to rely on OPEC for any increase in oil supply this year because producer co
