The Organisation of the Petroleum Exporting Countries rebuffed pressure from consuming countries, led by the US, to pump more oil ahead of the peak winter season after prices have surged more than 40 per since January.
Samuel Bodman, the US secretary of energy, on Tuesday reiterated his call for Opec to increase its output to replenish the world’s low crude oil inventories, echoing similar comments from the European Union and China.
West Texas Intermediate crude oil jumped $2.07 to $90.39 a barrel. In midday London trading it was $1.53 higher to $89.85 a barrel. Brent crude oil rose to $1.24 to $90.77 a barrel. Analysts warned that the oil price could revisit its recent nominal all-time high of $99.29 a barrel after Opec’s agreement if oil inventories continue to fall.
The US Department of Energy will release its weekly crude and products inventories number later on Wednesday, with the market anticipating a new fall on oil stocks.
The Opec meeting in Abu Dhabi, the first one in the United Arab Emirates in 29 years, was dominated by a struggle between the cartel’s moderates and the prices hawks.
While Saudi Arabia and other moderates, such as Kuwait, had been working behind the scenes in Abu Dhabi to placate consumers’ fears, the price hawks, led by Algeria and Venezuela, opposed any output increase and said a price of $100 a barrel was fair.
Delegates said ahead of Wednesday’s meeting that the cartel was considering two options: either increasing its official production limit by at least 500,000 b/d or leaving it unchanged. But the proposal for an increase was not formally tabled at the critical meeting of the ministers at the Emirates Palace hotel in Abu Dhai.
The price hawks gained the upper hand after moderate Gulf producers dropped their desire to raise production following a price drop of about 10 per cent last week. Worries about the strengh of demand among the moderate countries of the Gulf, including Saudi Arabia, finally tipped the outcome towards maintaining the current official quotas.
The oil cartel, which controls 40 per cent of the world’s oil supply, argued that the market is well balanced” and inventories remain at comfortable levels” to keep its official ceiling unchanged. However, officials from the cartel signalled that more oil is flowing to the market from Angola, Iraq and the United Arab Emirates.
The oil cartel allocated a new official production level, also known as quotas, to Angola and Ecuador of 1.9m barrels a day and 520,000 b/d respectively.
The new levels mean the now twelve Opec countries - subject to quota - will be pumping about 29.67m b/d, or about 200,000 b/d more than in October.
In its final communiqué, Opec expressed concerns about the economic impact of high prices, but added that there were not fundamental reasons for crude oil trading near $100 a barrel. The cartel said oil prices were driven by non-fundamental factors, including heavy influx of financial funds into commodities and speculative activity in the markets, while geopolitical factors have contributed to price volatility.”