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Oil ministers: OPEC keeps output steady
OPEC oil ministers on May 28 kept output targets unchanged in hopes a recovering world economy will raise prices through increased demand — and thus eliminate the need for them to cut back production.
An OPEC statement said the organization “decided to maintain current production levels unchanged for the time being.”
Oil producers reiterated their “firm commitment” to their existing quotas, in an effort to trim oversupply.
Most organization members are supposed to honor individual production targets, but the organization is still pumping more than 800,000 barrels a day above its overall target level of just under 25 million barrels.
While 100 percent compliance with quotas is unlikely, even an additional 10 percent compliance would take more than 400,000 barrels a day off markets, slicing into near record stocks in storage while reducing the price shock that an outright cut in production could cause.
Economic confidence The decision not to change production targets appeared due to belief that the U.S. — the world’s largest oil consumer — is gradually emerging from a severe recession and that demand there will support oil prices.
“We are seeing a light in the end of the tunnel,” said OPEC Secretary General Abdalla Salem El Badri.
“We don’t want to give a wrong signal to the market,” he added, when asked why the Organization of the Petroleum Exporting Countries decided against cutting production despite their concerns about significant oversupply and anemic demand from the U.S. and other major consumers hobbled by the recession.
A barrel of crude already fetches more than $60 compared to levels near $30 just four months ago. And that spike has come despite continued anemic worldwide demand, plentiful supply, and gloomy future forecasts.
Market reaction appeared to support the May 28 decision. Benchmark crude for July delivery was essentially steady shortly after the end of the OPEC meeting, fetching $63.42 a barrel by early afternoon in Europe in electronic trading on the New York Mercantile Exchange.
Prices have not been at that high level since early November.
Still, despite the decision to maintain present targets, OPEC ministers have repeatedly saying they would like to see crude rise to around $80 a barrel, even while being content to let economic factors do their work for them.
—GEORGE JAHN, Associated Press Writer
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