The outlook remains grim according to the Organisation of Petroleum Exporting Countries (OPEC) as it looks set to slash its 2009 oil demand out look by one million barrels per day (bpd).
Although the oil-producer cartel’s report is not out until late March, Abdullah al-Badri – OPEC’s Secretary General – said that the current oil price was “not really acceptable” to the group.
The group are scheduled to meet on March 15 in Vienna, and at such time ministers will discuss the current options to help stabilise oil supply. The meeting was originally tabled to examine how successfully member nations have complied with previous output cuts – most notably the most recent cut, made in December.
However, the cartel has made public that successive supply cuts made since last September have helped stabilise the price of oil. “The first step is to make sure we see full compliance,” said Abdullah bin Hamad al-Attiyah, Qatar’s Oil Minister
For OPEC, who produces around 40% of the world’s oil, further quota cuts will be redundant if not properly implemented. Saudi Arabia wants every member nation to first adhere to existing output ceilings, and until such time has stated that it will oppose further cuts.
The first quota cut was made in September of last year, when OPEC cut production by half a million barrels per day. This was swiftly consolidated by a 1.5 million bpd cut at October’s meeting. And, it was in December that the producer nations were told to collectively curtail production – by the largest sum yet – 2.2 million barrels. This accumulates to a total of 4.2 million bpd; equivalent to around 5% of global supply.
el-Badri estimated that current compliance from OPEC-nations stands at around 80%.
However, in an interesting turn of events if the market was to continue its current trend of recovery that it has seen up until Wednesday, OPEC may deem further cuts redundant, given the circumstances. A two-day rally on Monday and Tuesday saw prices rise above $48 a barrel for the first time since January.
“The market is feeling the effect of OPEC’s cuts so far, it is tightening. If everything is going in the right direction, probably this is an indication we shouldn’t rush into another cut decision,” commented an OPEC delegate.
Mood in OPEC appears split from nation-to-nation between consolidation of prior quota cuts – through compliance – and optimism that what has gone before may well be enough, as a short price jump may be the early sign of confidence slowly coming back into the market.