Members of the OPEC – pumping 40% of world supply – have decided against cutting output. It would still like a higher oil price – but first it wants members to comply with past cuts.
OPEC decided against cutting production – even though it fears the global crisis will force A further fall in oil consumption. OPEC has already cut production by 4.2. million tons a day from the September 2008 level, after prices dived over $100 to a low of $36/bbl. Expert say that prevented oil prices from sliding further. But OPEC Secretary General, Abdullah El-Badri, says as the previous cuts were not fully implemented – there are no new cuts in sight.
“We still have about 800,00 barrels a day to be reduced, and we have urged our member countries, that they should comply. I know that 100% compliance is impossible, but I think that close to 100% will reduce the overhang.”
Russia's representative, First Deputy Prime Minister, Igor Sechin – in the longest speech in OPEC history – illustrated Russia's efforts to cut production and oil exports to support the price level. Other measures include reserving more oil in storage and developing fields which will produce in the long term.
“It has been decided not to assign oil fields to companies – I’m talking about those with good infrastructure. We are going to work on fields that will take 2-3 years to develop and that have poorer infrastructure.”
The oil producing countries are still targeting a fair price of at least $60/bbl in order to finance the investment that’s needed to maintain steady supplies for the world market.
Heavyweight OPEC players like Saudi Arabia are looking to Russia to play a bigger part in supporting price levels by cutting output. Russia – the second largest oil exporter in the world – has already announced plans to cut production and boost domestic consumption. But with no new reduction from OPEC, Russia will have to intensify it's efforts or struggle with lower revenues like other oil exporters.