MercoPress. South Atlantic News Agency

OPEC: no further measures until full compliance of agreed oil cuts

Oil ministers from the 12 OPEC (Organization of Petroleum Exporting Countries) meeting in the Austrian capital Vienna over the weekend decided to keep oil production at current levels.

Some ministers had pressed for a cut in production, but others mainly Saudi Arabia, were believed to favour enforcing previous cuts before any new measures were considered.

With demand for oil predicted to fall this year, OPEC is keen to avoid another decline in the price of oil.

Prices have averaged 40 US dollars a barrel in 2009 compared with 100 USD last year.

According to OPEC figures, the 12 member states have so far delivered only around 80% of the 4.2 million bpd in cuts that have been agreed since September last year. The ministers pledged to comply more strictly with the cuts.

Another meeting will be held on 28 May to assess whether further cuts in production will be necessary.

Algeria, Venezuela and Qatar, had said that oil output should be cut further. Oil prices have fallen from a record high of more than 147 USD a barrel in July and currently trade around 46 USD as the global downturn has hit demand for oil and oil-based products.

Russia, which vies with Saudi Arabia as the world's largest oil producer, sent Deputy Prime Minister Igor Sechin to Vienna to observe proceedings and said in future it planned to send a permanent observer to OPEC.

However, it said it was not inclined to join the organisation.

The release following the Vienna meeting said that OPEC was concerned that the world economy is in the midst of the worst global economic recession in decades, with the global economy forecast to contract 0.2% in 2009, considerably lower than the forecast in December 2008, and downside risks dominating, especially in the OECD region.

OPEC estimates that because of the deep impact of the economic downturn, “world oil demand is estimated to decline by 1million bpd in 2009 to 84.6 million”. As a result high stock levels, which are currently at 59 days of forward cover, will persist. The cartel is also concerned that non-OPEC supply is forecast to grow by 400.000 bpd in 2009, to 50.7 million.

OPEC finally said it was pleased to announce that following the December 2008 decision to cut 4.2 million bpd from the September 2008 level production level, effective January first, “compliance for the month of February was 79%, which has contributed to balancing the price of the OPEC Reference Basket at around 40 USD, since the beginning of the year and despite the critical economic outlook”.

Therefore the Vienna conference “emphasized its commitment to comply fully with its decision of December 2008, in order to further contribute to market stability”.