OPEC ministers meeting in Vienna this week were expected to keep supply targets intact and instead rely on hoped-for economic growth to sustain oil prices. The oil market rose towards $69 a barrel on Monday after Group of 20 finance leaders said at a weekend meeting they would not end stimulus plans until recovery was well established.
Traders predicted the extended financial support would translate into higher fuel demand.Delegates already in Vienna ahead of the meeting of the Organization of the Petroleum Exporting Countries to begin late on Wednesday said they were satisfied with the oil price, even though inventory levels were much higher than OPEC considers appropriate.
â€œNothing has changed, the price fell a bit last week but thatâ€™s certainly not enough of a cause for any talk of a new cut,â€ one delegate told Reuters. â€œThereâ€™s no need to change output.â€I think the current price level is not an issue for most OPEC members,â€ another delegate said. 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 production. But as the oil market has recovered from a low of $32.40 in December — its weakest in nearly five years — to this yearâ€™s peak of $75 hit 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 lapsing 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 will not be agreed this week. Apart from varied discipline, OPEC, which supplies more than one third of the worldâ€™s oil, also faces the challenge of non-OPEC producers, which ignored the groupâ€™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 this Wednesdayâ€™s OPEC meeting, scheduled to start at 9.30 p.m. local time after Ramadan fasting.