At their latest meeting on December 22, 2009, in Luanda (Angola), OPEC ministers did precisely what the market expected them to do, i.e. nothing! Some murmured that OPEC’s inaction in terms of holding output at 24.84 million barrels per day (bpd), excluding Iraq’s output, did cause a brief spike and nothing more.
Nonchalant shrugs from traders and analysts alike suggest that some members would flout their respective agreed quota anyway which seems to be the norm. As usual, containing Saudi Arabia, which accounts for 30% of OPEC’s output, will prove mighty hard for the cartel. Regional estimates on the volume by which the Saudis usually exceed their daily quota, varies from 90k bpd to 200k bpd. However, OPEC insisted it would improve members' compliance with target quotas.
The cartel noted with “great concern” that, whilst the worst of the global recession appears to be over, the world economy remains confronted with the deepest, most wide-spread contraction since the 1940’s.
More importantly, for the first time since early 1980’s, demand for black gold was seen to be in decline for the second year running, according to OPEC. Faced by shrinking global industrial production, low private consumption and high unemployment, the cartel said it would leave oil production levels unchanged for the time being with a review slated for March 17, 2010.
There was also the customary call on non-OPEC producers to cooperate with the cartel to support oil market stabilisation and the restoration of market equilibrium. Status quo it is then.
© Gaurav Sharma 2009. Photo Courtesy Cairn Energy PLC