OPEC is leaving its production quotas unchanged, opting to take a cautious approach in a market awash in crude and a global economy still in the early stages of recovery.
The 12-nation Organization of Petroleum Exporting Countries early Thursday said “market fundamentals have remained weak,” even though current oil prices at about $71 are roughly double their level since December, when the group announced a record 4.2 million barrel per day cut from September 2008 levels.
“Since the market remains oversupplied and given the downside risks associated with the extremely fragile recovery, (OPEC) once again agreed to leave current production levels unchanged for the time being,” the statement said.
The Organization of Petroleum Exporting Countries (OPEC) meets in Vienna on Wednesday, with most analysts expecting the producer group, the source of more than a third of the world’s oil supply, to maintain its official output target stable around $70.
Oil prices pushed toward $69 a barrel in thin trade on Monday, with sentiment buoyed by Asian and European equities and by a decision by the G20 to keep economic stimulus measures in place. Group of 20 finance leaders, who met in London on Saturday, said they would not end economic stimulus plans until the recovery was well entrenched. Traders predicted the G20’s extended financial support would translate into higher fuel demand.
Oil prices, which fell 6.5% last week, have been trading in a range between $65 and $75 a barrel since the start of August, with prices swinging on economic data as investors seek clues about the speed of a recovery from the recession.
Oil prices languished near $35 a barrel Friday in Asia as traders eyed a weakening U.S. economy and falling global demand that’s sent crude down a third since last week.
Light, sweet crude for February delivery was down 2 cents at $35.38 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract fell $1.88 overnight to settle at $35.40, after trading as low as $33.20, a five-year low.
Concerns center on the U.S., the world’s largest consumer of oil, where falling consumer demand and rising unemployment feed each other and undermine demand for crude. Oil demand fell last year and is expected to drop again this year.
The Organization of Petroleum Exporting Countries (OPEC) lowered its energy demand forecast for 2009, saying in its January report that it expects world demand for crude will fall 180,000 barrels per day in 2009 from the previous year.
OPEC has announced 4.2 million barrels a day of production cuts since September, moves that investors have so far ignored. But investors may be anticipating those output cuts will start to tighten oil supplies later in the year.
Oil prices closed at less than $47 a barrel on Tuesday as news that OPEC made only two-thirds of its pledged output cuts last month outweighed a rebound in the U.S. stock market. New York light sweet crude for January dropped $2.32 to close at $46.96, the first time the benchmark contract has settled below $47 since May 2005.
“The story about OPEC still not in full compliance with pledged output reductions is the reason why crude futures are down right now,” said Phil Flynn, an analyst at Alaron Trading in Chicago. “This lack of compliance is disappointing to the market and this puts into doubt OPEC’s indications that they will make more production cuts later this month.” Members of the OPEC had pledged to lower output by 1.5 million barrels per day for November, but were only 66 percent compliant with the target last month.
Oil prices have plummeted amid the global financial crisis from record highs hit on July 11: 147.27 dollars in New York contract and 147.50 dollars in London. “There is still a fear that the global economy is in deep trouble and the oil price is simply following that,” said Adam Sieminski, analyst at Deutsche Bank. Oil prices fell more than five dollars Monday after OPEC decided at a weekend meeting in Cairo against cutting production, preferring to wait until December before reducing crude exports.
World prices for oil futures continued to fall. On the stock market price of oil fell another 6.3% and established by the end of the day below 70 U.S. $ / bbl. In New York, at the official price of NYMEX futures Light, Sweet Crude Oil (November) fell 4 cents to $ 69 and settled at around 69.85 U.S. $ / bbl. In London InterContinental Exchange Futures Europe (ISE Futures Europe) official price of IPE Brent Crude futures lost 4 to $ 48 cents and settled at around 66.32 U.S. $ / bbl.
On Thursday, oil prices declined in the tenth time since the beginning of this month. The cause was a significant increase in U.S. stockpiles of crude oil and gasoline, while energy demand in the country over the previous year dropped significantly due to the economic crisis.
Meanwhile, the leadership of the OPEC has decided to postpone the extraordinary meeting of oil ministers of countries – participating in the international oil cartel on 24 October. Initially the event was scheduled for 18 November in Vienna. The reason to postpone the meeting at an earlier date has been accelerated the fall in world oil prices. Including the OPEC oil basket for the first time in 13 and a half months fell below 70 U.S. $ / bbl.