Iraqi Oil Minister Hussain al-Shahristani confirmed the decision after talks lasting little more than three hours.
OPEC, which pumps over a third of the world’s oil, had agreed cuts totaling 1.7 million barrels per day, or six percent of supplies, at its previous two meetings. The emphasis now was on ensuring those reductions were implemented in full, the head of Libya’s delegation Shokri Ghanem told reporters. Kuwait’s oil minister agreed.
“The market is balanced, there is no need to change our production targets,” Sheikh Ali al-Jarrah al-Sabah said.
But ministers were wary two waves of selling on global equity markets could presage a bigger sell-off that would hurt economic growth and oil demand.
OPEC President and United Arab Emirates’ Oil Minister Mohammed bin Dhaen al-Hamli may convene another meeting in June to review the situation, delegates said.
Stocks wobbled this week on concerns over the impact of U.S. home owners falling behind with mortgage payments. Equities and oil rose on Thursday, with U.S. crude up 19 cents at $58.36.
“We are watching developments on world stock markets, to assess their possible impact on the global economy and, in particular, on energy demand,” Hamli said.
“We remain concerned about the continuing weakness of the U.S. dollar against other major currencies, notably the euro and the pound sterling, because this is having a significant effect on the purchasing power of oil-producing developing countries.”
Nigerian Energy Minister Edmund Daukoru said the risks to the oil price were to the downside, adding: “With the slowdown of the global economy, it is not a time to relax.”
Analysts estimate OPEC has made good one million bpd of the pledged reductions. OPEC puts the figure closer to 1.2 million.
Too much restraint?
The International Energy Agency and some analysts believe OPEC may have gone too far with its supply curbs.
According to the IEA, adviser to 26 industrialized countries, OECD countries could be headed for the largest first quarter drop in oil stocks for over 10 years.
“OPEC may have had the impression that the market was oversupplied, but that is no longer the case. In fact we see it as rather undersupplied,” IEA Executive Director Claude Mandil told Reuters on Wednesday.
Even the most conservative projection, OPEC’s own, puts demand for OPEC oil at 30.4 million bpd this year. The number includes Iraq and new member Angola, both of which are exempt from output restrictions for the time being.
The 10 OPEC members subject to restrictions currently have an output target of 25.8 million bpd.
The oil price is well down on its July 2006 peak of $78.40, but is still almost three times the level at the start of 2002 when Asian demand ignited. OPEC says prices must be sufficiently high to encourage investment without choking economic growth.
Gary Ross, CEO of PIRA Energy consultancy, said OPEC was trying to balance a tightening oil market and an uncertain economic outlook which could undermine future demand.
“They’ve had remarkable success with their existing policy. Prices are where they want them to be. They don’t want prices to run away to the upside but they’ve also seen how brutal the market can be on the downside.”
OPEC scrupulously avoids setting a price target but some ministers have said they believe $60 is a reasonable level for U.S. oil. Others set the bar higher. MSNBC
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