The Organization of the Petroleum Exporting Countries has said it will cut supply by 4.2 million barrels per day — about 5 percent of world demand — as recession erodes oil use. It meets on Sept. 9 to set policy.
“It is hard to predict now, but I don’t think there is a need to do anything,” said one of the delegates, who declined to be identified. “The market is OK.”
Oil prices have risen above $ 70 a barrel this week, close to the high for the year and within sight of the $ 75-$ 80 that many in OPEC have said is needed to secure investment in new supplies for the long term.
But analysts say that rising equity markets and hopes of economic recovery are powering oil’s rally, rather than a tighter oil supply and demand balance.
Some in OPEC have floated the idea of a further supply cut. Algeria said on July 20 OPEC might need to lower output again and Iran said on July 31 some members may push for a cut if prices fell. Saudi Arabia, the most influential member in the 12-country group, has made no comment.
The market has rallied despite large amounts of oil in storage. Inventories in industrialised countries equalled 62.5 days of demand at the end of May, far more than the 52-53 days OPEC would like to see. ¨ûIEA/M¨ü
A second OPEC delegate said that while inventories were high, it would be difficult for the group to justify a further cut in output given the weak economy.
“Stocks are still high but crude stocks are not as high as before. Product stocks are high, especially middle distillates. Now winter is coming, so maybe middle distillate stocks will go down,” the delegate said.
“How can you cut with this economy? The price is going up and down. It’s still below $ 75. But if that is because of the economy, how can OPEC cut?
