OPEC Refuses Output Cut

The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s crude oil, will aim to complete existing production cutbacks agreed to late last year and meet again on May 28 to review policy, Secretary-General Abdalla el-Badri said after Sunday’s meeting in Vienna.

Global inventories have started to fall, indicating the policy is working. A new cut threatened a price increase that could harm the economy, Saudi Arabian Oil Minister Ali al-Naimi said.

“They’ve decided that, in the medium term, the danger to the global economy was greater than the danger of high inventories,” David Kirsch, an analyst with Washington-based consultant PFC Energy, said in an interview in Vienna. “A rollover should be sufficient to draw down inventories to acceptable levels by the third quarter.”

The collapse in oil prices has cut costs for consumers and business, one of the few bright spots in a bleak economic picture.

“A lot of people would have been surprised by OPEC’s lack of action,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “It’s quite bearish.” Algerian Oil Minister Chakib Khelil, who had argued for another cutback prior to the meeting, said afterwards that all OPEC members will make an “extra effort” to comply with the existing cutbacks.

OPEC agreed to three cutbacks late last year totaling 4.2 million barrels a day. But currently the group has completed 79 percent of its promised reduction.

“Now it is time to fully adhere to the cuts we agreed upon,” Qatari Oil Minister Abdullah Bin Hamad Al-Attiyah said after the meeting.

Source: Bloomberg

Author: Ksenia Kochneva