OPEC To keep Supply Target To Maintain Oil Price Levels

The Organisation of Petroleum Exporting Countries(OPEC) has expressed the desire to keep supply targets intact instead of relying on the hoped-for economic growth to sustain oil prices.

This means that the oil cartel intends not to cut supply to create high prices for the commodity. The oil market rose towards $69 a barrel yesterday after the Group of (G-20) finance leaders said at a weekend meeting that they would not end stimulus plans until recovery was well established.

Traders predicted the extended financial support would translate into higher fuel demand. Delegates attending the Vienna meeting of the organisation, said they were satisfied with the oil price, even though inventory levels were much higher than OPEC considers appropriate.

'Nothing has changed, the price fell a bit last week but that's certainly not enough a cause for any talk of a new cut,' one delegate told Reuters. 'There's no need to change output.'

OPEC has kept its official output targets steady since it announced late last year a record cut of 4.2 million barrels per day from September 2008.

But as the oil market has recovered from a low of $32.40 in December -- its weakest in nearly five years -- to this year's peak of $75 in August, it has reduced levels of compliance with agreed curbs from a peak of 80 per cent of agreed cuts to less than 70 per cent.

The discipline has contributed to an inventory build up that has taken stock levels to the equivalent of nearly 62 days of forward cover, according to figures from the International Energy Agency. That is around 10 days more than OPEC views as comfortable.

For some OPEC members, high stocks are a greater issue than they are for others, although all in OPEC have been pleasantly surprised trader optimism has sustained a rally in defiance of bulging inventories.

Leading exporter Saudi Arabia said earlier in the year it was at ease with an oil market around $50, although that level was well below the roughly $75 it has said is needed to stimulate investment in new supplies.

Saudi Arabia has taken the biggest share of output cuts while countenancing sliding discipline from other members, notably from OPEC president, Angola.

The different levels of adherence complicate the task of any new output cut, although some analysts have said OPEC might have to address when to reduce supplies even if any new curbs would not be agreed this week.

Apart from varied discipline, OPEC, which supplies more than one third of the world's oil, also faces the challenge of non-OPEC producers, which ignored the group's appeals to join in attempts to bolster the price.

Output from the largest non-OPEC exporter, Russia, hit a record high in August of nearly 10 million bpd. Together with other observer nations, Russia is not invited to tomorrow's OPEC meeting.

— Reuters