No more output cuts for now, says OPEC

16 March 2009

Ministers of the Organization of the Petroleum Exporting Countries agreed to leave existing output targets unchanged, but promised to enforce those curbs more strictly and said they would meet again at the end of May to review progress.

The OPEC said after their meeting in Vienna that the decision to put of another cut reflected concern for the economy and a belief that supply curbs imposed in three cuts since September have begun to remove the excess from oil markets. OPEC members will meet again on 28 May to reassess the situation.

Crude prices fell more than four per cent, disappointed by the OPEC decision. In after-hours trading, crude was down 1.65 cents at $44.60 per barrel.

Speaking on the outcome of the OPEC meet, Peter McGuire, MD, Commodity Warrants Australia, said, "We were quite surprised that they didn't move forward with a million or a million-and-a-half barrel oil cut. But we expect something within the next 6-8 months with the next meeting."

According to Moneycontrol, McGuire said there are no great numbers coming out this week. "It is just a week to see where US equities track. We see a little bit of a bounce and see 7,500 on the Dow by the end of the week. So, that could be the catalyst to have a little bit of rally in equity markets calling about 8,000 on the Dow in the next 3-4 weeks."

Secretary-General Abdalla el-Badri said after yesterday's meeting that OPEC members still need to trim about 800,000 barrels a day to comply with the record output reductions decided in December, after oil slumped more than $100 a barrel from July's record.

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.