OPEC holds output steady

ABU DHABI (United Arab Emirates)—OPEC decided Wednesday to keep its output ceilings steady in a move that propelled crude toward $90 a barrel, but plans to review the situation early next year.
The move by the 13-nation Organization of Petroleum Exporting countries appeared to reflect OPEC concerns that it would be counterproductive to raise overall production quotas at a time when prices have retreated about 10 percent from recent record highs.
It also seemed to suggest that OPEC now views prices near or above $90 — an increase of about $40 since the start of the year — as acceptable. Still, OPEC’s announcement that it would meet in February for a review of the world economy and other factors indicated that the organization was prepared to increase quotas should prices go much higher.
A final communique from OPEC’s oil ministers’ meeting in Abu Dhabi said the group would leave output unchanged “for the time being,” because the world was “well supplied” and crude reserves at comfortable levels.
“We have enough stocks in the market,” OPEC Secretary-General Abdalla Salem el-Badri said after the decision was reached. “There is no reason for prices to go (to) $100 a barrel,” he added, alluding to record trading and closing prices last month that were just short of that mark.
Still, the statement expressed concern about market volatility driven by speculation — and suggested OPEC was ready to step in if needed by taking “every measure deemed necessary to keep market stability through the maintenance of supply and demand in balance.”
European and U.S. benchmark crude prices gained strongly even before the official statement after Shokri Ghanem, Libya’s chief oil official pre-empted the announcement of the formal decision, adding around $2 each to about $90 a barrel before falling back somewhat.
Light, sweet crude for January delivery added $1.61 to $89.93 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. January Brent crude futures rose $1.28 to $90.81 a barrel on the ICE Futures exchange in London.
OPEC oil ministers went into the meeting facing a tough choice. Agreement on an increase in output ceilings would have reassured volatile markets that have seen wild swings over the past few weeks, including a nearly $10 drop over five days last week that was the largest ever in nominal terms.
But such a decision could have sharply accelerated oil’s decline in price — which, if it continues long term would cut into OPEC revenues already suffering from a weak dollar.
An OPEC decision to raise output just before the 1997 Asian financial crisis led to oil prices plummeting from $20 to $12 a barrel — a development ministers appeared determined to avoid amid uncertainty on the state of key world economies.
At its last meeting, in Vienna, Austria, OPEC agreed to raise oil output by 500,000 barrels a day to restrain ballooning prices. Instead prices spiked, reaching a trading record high of $99.29 last month before leveling off — a trend that had led to predictions that the group would opt for again raise output ceilings in Abu Dhabi.
“I don’t think the issue is raising production ... because that’s not going to have an impact on prices,” said Chakib Khelil, Algeria’s oil minister, who takes over as OPEC president Jan. 1 in comments reflecting on developments since September.
Still some analysts criticized the OPEC decision, suggesting the organization had opted for maximum profits and missed a chance send a signal it was more concerned about price stability.
Peter Beutel, president of the U.S. energy risk management firm Cameron Hanover, said oil ministers now considered prices above $90 a barrel “as their birthright,” adding in a research note: “If prices somehow find a way to finish in negative territory today, despite OPEC’s greed, it would be really bearish.”
Oil analyst John Hall of John Hall Associates in London also expressed surprise at the decision to stick to present quotas.
OPEC argues that “because the price has fallen by 10 percent over the past week the market is stabilized,” he said. “What they won’t accept is that the price of oil has fallen because the market was of a view that they would increase output.” Still, he said that an OPEC decision to meet early next year should cap prices at around the $90-95 level as traders wait to see what that gathering decides.—Agencies