OPEC set to hold steady, looks to economy
OPEC was set to keep output targets steady at a meeting late on Wednesday after top exporter Saudi Arabia looked to economic strength to bolster the oil price and dismissed bulging inventories.
International benchmark U.S. crude climbed above $72 a barrel on Wednesday, close to this year’s high of $75 hit at the end of August.
Saudi Arabia, which has led calls to maintain the Organization of the Petroleum Exporting Countries’ agreed curbs, said a fundamental shift in the oil market meant big stockpiles were irrelevant.
“You guys must realize that there is a fundamental change in the market. Economic growth is the name of the game, that’s what’s going to drive the price. As long as economic growth is there, the price is going to go up,” Saudi Oil Minister Ali al-Naimi told reporters.
“We are happy where it (the price) is, and it’s going to be there for a while,” he said further, but he did not expect a re-run of the rally to nearly $150 in July last year, which was followed by a crash to just above $32 a barrel in December.
Other members of the 12-member group, which supplies more than a third of the world’s oil, said there was general agreement to stick to current output curbs.
Even Venezuela, which in the past has been quick to urge OPEC to drive the price higher, has said output levels should be maintained, although its Oil Minister Rafael Ramirez stayed away from Wednesday’s meeting free credit report and score.
He was instead in non-OPEC Russia — which unusually was not invited to attend Wednesday’s conference as an observer — accompanying his president on a tour of Europe and the Middle East.
OPEC began meeting around 10 p.m. (2000 GMT) following Ramadan fasting.
RISING TARGET
Early this year, when the economy was still fragile, Saudi Arabia said it could tolerate oil prices of around $50 a barrel.
By May, as the world’s finances began to recover, it was setting its sights on roughly $75 as a reasonable level for producers, needing to invest in new supplies, and consumers reeling from the financial crisis unleashed after the collapse of Lehman Brothers on September 15 last year.
As oil has been buoyed by growing confidence across asset classes, Saudi Arabia’s price target has so far has proved realistic, although some OPEC ministers have pointed to uncertainties that could undermine the market.
For now, those doubts added to the reasons to keep supply policy unchanged as any sudden rise in the oil price could set back recovery, with negative implications for fuel demand.
OPEC could still ask members to comply more closely with existing curbs, which would amount to an unofficial supply cut, although 100 percent discipline is regarded as impossible.
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