LUANDA, Angola — OPEC hasn’t touched its oil production targets for a year, and with the economy still shaky oil ministers gathering for Tuesday’s meeting in this African capital are unlikely to go tinkering with them now.
Saudi Arabia’s oil minister underscored that sentiment just last week. Ali Naimi, who represents OPEC’s most powerful member, told the London-based Arabic daily al-Hayat that existing prices are “demanded by everyone, and not us only,” suggesting any output adjustment was unlikely.
“The next OPEC meeting Tuesday will not result in any change in production levels,” Naimi told the Saudi-owned paper in comments published Friday.
Crude prices have staged an incredible turnaround in the past year, more than doubling from their depths below $35 a barrel to trade in a zone many producing countries say they’re happy with for the time being.
Saudi Arabia, the world’s top crude exporter and OPEC’s de facto leader, considers at least $75 a fair price for a barrel of oil. That’s not far from where prices stand now.
Benchmark crude settled at $74.42 a barrel Friday on the New York Mercantile Exchange.
“I don’t think anyone in the group was really expecting prices to rebound as fast as they did,” said independent analyst and trader Stephen Schork. “They’re counting their blessings with the price they have, and that it’s been sustained.”
The bloc last week nudged its 2010 forecast for global oil demand slightly higher, but warned that the market still faces risks because of lingering questions about the world’s ability to rebound from its worst recession in decades.
OPEC called 2009 “one of the worst years” for global oil demand, and expects appetite for its chief export to remain weak through the first half of 2010.
Anemic demand has prevented prices from heading back toward $100 a barrel. That has conveniently kept OPEC from drawing blame for stifling early signs of an economic turnaround.
“When the price of oil gets to $80, OPEC obviously recognizes it would inhibit recovery,” said John Hall, chairman of EnergyQuote’s John Hall Associates consultancy in London. “They are concerned. They want to see recovery move ahead.”
That’s why the official line heading into Tuesday’s meeting is all about holding the status quo. One OPEC minister after another has made a point in recent weeks of saying he doesn’t expect any new production targets to emerge.
The last time the Organization of the Petroleum Exporting Countries adjusted its output targets was December 2008, when the 12-nation bloc capped a rapid-fire series of cuts that slashed a whopping 4.2 million barrels off the world’s daily oil supply.
Those cutbacks were meant to halt a slide that pushed prices from an all-time record near $150 a barrel to the low-$30s in just five months. The strategy appears to have worked so far.
With new targets likely off the table, analysts say talks in Angola will instead swing back to that perennial of OPEC problems: members’ inability to maintain cohesion by sticking to their agreed-upon share of the pie.
“There is going to be one topic of discussion in Angola. It’s going to be all about compliance,” said James Cordier, president of Tampa, Florida-based trading firm Liberty Trading Group. “Compliance is pathetic right now.”
Many member countries take advantage of rising prices to pump more than their allotted share, but OPEC hard-liners like Saudi Arabia and some of its Gulf Arab neighbours frown on that oversupply because it undermines the group’s efforts to maintain a price floor. Analysts say compliance levels for the group have dropped to a historically low point of about 60 per cent.
One option OPEC has is to retool its official output targets to better reflect its own cheating members’ actual production levels, according to one analyst.
“What they could now do is restore the balance,” EnergyQuote’s Hall said. “That way they can look like they’ve done something and say they’ve got compliance under control.”
For Angola, OPEC’s newest member, Tuesday’s gathering is a chance to spotlight its emergence as a major player in the oil industry after decades of civil war.
A boom in its petroleum sector has kick-started development efforts like new high-rise building projects in the capital Luanda, though many in the Portuguese-speaking country continue to suffer from gripping poverty.
Angola now vies with Nigeria as Africa’s top oil producer. Its gains are the result both of increased output at home and continued militant attacks against oil facilities in the Niger Delta that have crippled Nigeria’s oil industry.