ABUJA, Nigeria – OPEC ministers agreed Thursday to hold oil production unchanged for now but set the stage for a cutback of half a million barrels a day in February. Oil rose above $62 a barrel in response.
The decision — in a closed meeting of the 11-nation Organization of Petroleum Exporting Countries — was confirmed by OPEC President Edmund Daukoru, who is also oil minister of Nigeria, along with ministers from other member nations.
With world inventories high but moving downward and the coldest days of the Northern Hemisphere winter still ahead, the move was a compromise — meant to keep markets and consumers calm at least in the short term. It also left a possible window for the organization to retrench and decide not to cut in February should demand spike, moving prices sharply upward.
"Over $60, OPEC is nervous about doing anything," said energy analyst John Hall of John Hall Associates, suggesting that a cutback in two months depended on market conditions.
But Qatar's Oil Minister Abdullah bin Hamad Al Attiyah denied this, saying the cut will go ahead no matter what happens with oil price movements between now and then.
Benchmark crude futures moved higher after the OPEC decision, with January Brent on London's ICE futures exchange trading up 90 cents at $62.23 a barrel, and light, sweet crude on the New York Mercantile Exchange up 81 cents at $62.18 a barrel in electronic trading.
Any new cut will come on the heels of a 1.2 million barrel-a-day reduction agreed to in October that has not yet been fully implemented. The International Energy Agency — the developing world's energy watchdog — says OPEC now produces about 780,000 barrels less than before the October decision to cut back.
Sentiment for paring production within OPEC is driven by concerns over ballooning world inventories, a weak dollar and higher production from nonmembers.
A skittish market has also sent shudders through OPEC ranks. Oil prices peaked at $78.40 a barrel in July, then plummeted toward $55 last month before rising to present levels in the low $60s — just above the red line for most member nations.
Even moderate Saudi Arabia, whose voice carries weight proportionate to its status as OPEC's top producer, had initially indicated it might be leaning toward endorsing a further cutback at the Thursday meeting, with its oil minister Ali Naimi speaking of the need to slash 100 million barrels from bulging world inventories.
But ahead of the meeting, he expressed less sentiment for an immediate reduction.
Citing a report from the IEA, Naimi said "about 50 million barrels" had been removed from world stockpiles, so "the market is much better."
The agency said total OPEC daily output in November was 28.9 million barrels. With the exclusion of Iraq, which is exempt from quotas, the group produced 27.1 million barrels a day.
Daukoru had also appeared to retrench on the need to trim output immediately, saying OPEC needed first to "look at the facts" before making a decision.
But price hawks Iran, Algeria and Venezuela had remained firm on the need for reductions now.
"Whatever the size, we need one" immediately, said Algeria's oil minister, Chakib Khelil, alluding to the other possibility being floated before the meeting began — a decision not to wait until February but to cut production by a daily 300,000 barrels as soon as possible.
Iran — second only to the Saudis in OPEC output — also called for immediate cutbacks, along with Venezuela.
Despite his relatively upbeat comments earlier, Daukoru, in an address to the meeting, suggested cutbacks would be necessary — if not now, later. He described the recent recovery in prices as "hesitant" and vulnerable to "continuing oversupply, high inventories (and) a mild winter."
A major factor at the meeting is the level of oil inventories in the U.S. and other large consuming nations. Because of lower than expected refinery operations, crude oil inventories stand at a 12-year high for this time of year, at near 340 million barrels.
Still the U.S. Energy Department released data Wednesday showing a 4.3 million barrel drop in U.S. crude oil inventories last week, while the International Energy Agency said in its monthly report that stockpiles of crude in industrialized nations fell by 40 million barrels in October.