OPEC Maintains Oil Output, May Cut in March
OPEC on Friday kept oil supplies unchanged and began a debate about whether or not to deploy production curbs in March to defend prices against a drop in demand should recession bite in the United States.
The Organization of the Petroleum Exporting Countries rejected an appeal from Washington for more oil to lower fuel bills and bolster its slowing economy.
U.S. light, sweet crude was lower, but held above $90 a barrel.
Powerful Saudi Oil Minister Ali al-Naimi said he would have pushed for an output increase if it were needed but that global supply and demand were in balance.
"The condition of the market is sound currently, supply and demand are equal and global reserves are fine," Naimi said, al-Hayat newspaper reported.
"No surprise with this decision," said analyst Simon Wardell at Global Insight.
"I think the instinct is to cut, but with a meeting next month they were always likely to wait until then to make the cut they believe is needed. They want to balance consumer concerns over the global economy with their own desire to support prices and ensure government revenues continue to accumulate."
Leading price hawks Venezuela and Iran already are suggesting OPEC may need to consider output curbs at the group's March 5 meeting to put a floor under prices.
"Maybe, maybe. We have to be very careful and keep a close watch on inventories," said Venezuelan Oil Minister Rafael Ramirez.
Oil inventories normally rise during the second quarter during a seasonal dip in demand and because of annual refinery maintenance programmes.
But delegates say Saudi Arabia and its Gulf allies would prefer to see prices down from $90 to ease recessionary pressures that will dampen demand for OPEC's oil.
"The responsible members aren't talking about cutting yet," said an OPEC delegate.
That could mean a stand-off between those keen to defend prices and others concerned that supply curbs could accelerate an economic downturn.
"We don't want to be pumping more barrels into an economy that tanks but equally we don't want to be cutting and precipitating a recession either," said one senior OPEC delegate.
Saudi's Naimi said Riyadh now was pumping at 9.2 million barrels daily, well in excess of its OPEC allocation of 8.94 million bpd.
Traders say that would suggest he is making a discreet effort to ease prices -- normally at this time of year Saudi would be reducing output ahead of a seasonal second quarter drop in demand.
During a 6-year oil price rally OPEC has often said it was powerless to influence prices, usually blaming speculators for a bull run that took crude over $100 a barrel in early January.
Driven by rising Chinese demand and with global growth of some 5 percent, the world economy proved able to cope with inflated fuel prices.
As growth slows, oil markets will be watching closely to see how far OPEC goes with supply curbs to prop up prices.
Many in the 13-member organisation take the view that oil plays no part in a downturn led by the U.S housing market crisis and the resulting credit crunch.
"A lot depends on what signal they want to send to the markets in general," said analyst Mike Wittner at Societe Generale.
"They don't want to be perceived as the bad guy, I don't think they want to be perceived as making it worse. But what caused the slowdown? The slowdown was caused by the sub-prime issues...it was not about oil prices."