QUITO, Ecuador — OPEC ministers decided Saturday to keep oil output at current levels, citing ample inventories amid persisting global economic uncertainty and a price of just under $90 a barrel.
The 12-member cartel said after an unusually short meeting that it based its decision on projections showing demand for crude would grow more slowly in 2011 than this year.
Its statement also cited the “challenging risks to the fragile global economic recovery” including “fears of a second banking crisis in Europe.”
The world’s major industrialized nations continue to face “lower industrial output, lagging private consumption as well as persistently high unemployment,” the ministers said.
“The market is in balance and is stable,” said oil minister Ali Naimi of Saudi Arabia, OPEC’s biggest producer. “The fundamentals are good.” Suffering a cold, he left quickly after the closed-door meeting, which lasted less than two hours.
OPEC’s next scheduled gathering is June 2 in Vienna, its home. Asked whether it could convene earlier if prices were to shoot up, the group’s secretary-general, Abdulla Salem El-Badri said that is always a possibility.
“OPEC is always ready to meet when there is important change in the market,” he said.
There was much discussion about whether oil would soon broach the psychological price barrier of $100 — or even climb nearer its 2008 historic peak of $147 a barrel.
Venezuela’s minister, Rafael Ramirez, said he thought such a price was “proper” considering how much producers invest in removing crude from the ground.
The “no-change” announcement was widely anticipated and four of the cartel’s ministers — from Iraq, Kuwait, Qatar and Nigeria — did not even make the trip, sending lower-level delegates to this Andean capital.
OPEC, which is responsible for 35 percent of global oil production, has not changed its output quotas since late 2008. Last month, Naimi said prices from $70 to $90 per barrel were tolerable for consumers. On Saturday, he lowered the high end to $80 when asked.
The 50-year-old cartel has had a good year, with prices hovering in the mid-$80 range and profits up 32 percent over 2009 to $750 billion, according to U.S. Energy Department estimates. OPEC does not release profit numbers.
Oil reached a two-year high of nearly $91 on Tuesday — as traders gauged the dimensions of 2011 demand and responded to a particularly harsh onset of winter in Europe.
The Paris-based International Energy Agency, or IEA, said Friday that stronger-than-anticipated consumption next year in North America and emerging Asian economies led by China could compel OPEC to boost supply “if prices continue their relentless rise.”
Issuing its global oil demand forecast, the IEA said it anticipated a rise in demand next year to 88.8 million barrels a day, 260,000 daily barrels more than previously forecast.
OPEC’s monthly market report, released Friday, forecast a boost in demand of 1.2 million barrels per day in 2011 over this year’s levels to an average of 87.1 million.
While ministers expect demand for crude to continue to grow, “At this moment, demand is not good,” Iran’s oil minister, Masoud Mir-Kazem, told reporters.
“If demand does turns out to be stronger than they’ve expected, there is still a safety cushion out there and they can come back later and increase production,” said analyst David Kirsch of PFC Energy in Washington. “Or more likely, what happens is that individual members cheat.”
El-Badri said compliance was currently around 60 percent.
Oil supplies in major industrialized nations and China are currently well above normal, and while OPEC forecast a demand boost in North America and China in the monthly market report it published Friday, it believes western Europe’s festering debt crisis will dampen consumption there.
El-Badri said oil stocks were at seven days above the five-year average. “There is plenty of oil in the market,” he added. “At OPEC we have six or 7 million barrels a day of excess capacity.”
OPEC averaged 29.1 million barrels of production last month, a drop of 70,000 barrels from October, according to Platts, which surveys industry officials and analysts.
OPEC last changed output in late 2008 when it capped a record series of cuts to help boost prices that had plummeted with the global financial meltdown.
Some analysts believe conditions are now conspiring against much more upward pressure on prices as the effects wear off from the U.S. Federal Reserve Bank’s decision to issue and buy up to $2.3 trillion in U.S. Treasury bonds.
The post-meltdown move — essentially printing money — made U.S. exports cheaper abroad and boosted the price of oil. It also encouraged the Chinese to buy and store more oil.
Many analysts believes $100 a barrel for oil is inevitable in 2011 though it could be months before it gets there.
“Everyone is worked up about $100 a barrel,” said Barbara Shook, a Houston-based analyst with the Energy Intelligence Group. It’s a psychological number. A hundred-dollar oil means that you’ve got $3 gasoline at every market in the U.S.
“And that’s another tipping point. It could drop consumption, decrease discretionary driving, things like that,” she said.
Ecuador, which rejoined OPEC in 2007 after 15-year absence, held the rotating presidency this year. Iran will take over for 2011.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
