OPEC ministers to debate compliance versus cuts
OPEC ministers in Vienna this weekend will debate whether the best policy is strict compliance with existing output curbs or a new set of cuts as they balance the issues of bulging oil stocks and a bruised world economy.
Ministers arriving ahead of Sunday’s talks have said the first item on the agenda was tighter enforcement of agreements since September to lower supply targets by 4.2 million barrels per day (bpd).
“Compliance is very good,” Saudi Arabian Oil Minister Ali al-Naimi told reporters. “We’d like to see compliance as high as possible. It is over 80 percent now, it can be better.”
Naimi said the output cuts were proving effective in reducing oversupply, but demand was expected to stay weak.
“Inventories are coming down and will come down in due time,” he said.
“You have to understand that the world economy is not as healthy as it should be. We should expect demand world-wide to be down.”
Sources have said some members of the 12-member producers’ club would favor more decisive action than just complying with existing output curbs.
But the ministers who have so far spoken in Vienna have focused on compliance easy payday loans.
“First we have to check the commitment, then we can discuss what we should do in the future,” Qatari Oil Minister Abdullah al-Attiyah said.
Whatever the outcome of Sunday’s meeting, Saudi Arabia, the world’s leading exporter and the best-placed to add or subtract barrels of oil could decide unilaterally how much it thinks the market needs.
Independent observers have said Saudi Arabia is already pumping less than its implied target.
HISTORIC CUTS
The cuts since last September are the deepest and most rapid yet and the rate of compliance is historically high.
They have helped to pull prices up from a low of $32.40 in December to around $46 now for U.S. crude — a level that is just over $100 below last year’s record high.
But inventories are still brimming and weak demand, especially heading into the second quarter when fuel consumption is typically at its lowest after the end of the northern hemisphere winter, could lead to further stock builds.