This weekend's OPEC meeting went by without change in the cartel's output quota. The cartel decided to leave the quota unchanged and instead focus on compliance by its members:
OPEC pumps 40 percent of the world’s oil and has reduced daily output targets by 4.2 million barrels since September to prevent a glut and slow the decline in prices. The 11 member- states subject to quotas are still producing about 800,000 barrels a day more than the group agreed in December.
“We need to adhere and then in May we can look if other measures can be taken,” OPEC President Jose Maria Botelho de Vasconcelos said yesterday.
A peculiar decision by OPEC after several of its members over the last week made comments regarding certain price levels. Venezuela's oil minister said they are looking for a price floor of $70. Venezuela, Iran, Russia and every other producer would love a floor price a $70 a barrel given today's price range being stuck in the $40's. Oil producing states had a taste of $70+ oil last year and spent accordingly and can now only hope of $70.
Opec's decision shows the cartel is concerned about the fragility of the world economy. The cartel cut daily output by 4.2 million barrels since last September. To achieve their $70 goal an additional output reduction is necessary.
The cartel's move may show their understanding that to reduce supply to artificially stimulate prices would threaten hope for an economic recovery and ultimately drive prices lower. Shrinking demand continues to drive prices. Despite last week's rally in the stock market crude oil remains stuck in its $40 - $48 range. Opec's decision not to cut may leave prices rangebound or lead prices lower through the $40 mark.
Opec's decision shows the cartel is concerned about the fragility of the world economy. The cartel cut daily output by 4.2 million barrels since last September. To achieve their $70 goal an additional output reduction is necessary.
The cartel's move may show their understanding that to reduce supply to artificially stimulate prices would threaten hope for an economic recovery and ultimately drive prices lower. Shrinking demand continues to drive prices. Despite last week's rally in the stock market crude oil remains stuck in its $40 - $48 range. Opec's decision not to cut may leave prices rangebound or lead prices lower through the $40 mark.
