OPEC leaves oil production unchanged

OPEC agreed at a meeting in the Angolan capital of Luanda on Tuesday to keep its oil production unchanged at current levels, an OPEC delegate told Reuters.

The delegate was speaking shortly after the start of a closed session of OPEC ministers in Angola that is still underway.

Supply restrictions by the 12-member Organization of the Petroleum Exporting Countries that pumps about 50 percent of the world's oil exports have helped lift prices from $40 a barrel at the start of the year.

Key points:

The agreement leaves the implied target for oil output by the Organization of the Petroleum Exporting Countries, excluding Iraq, at 24.84 million barrels per day (bpd).

OPEC promised to cut output by 4.2 million bpd from its production levels in September 2008 and analysts say OPEC has implemented around 60 percent of the promised cuts.

A Reuters survey last month estimated the 12-member grouping, excluding Iraq, pumped about 26.5 million bpd in November. Iraq is not included in the quota totals because it is rebuilding in the aftermath of war.

Reactions:

Damian Kennaby, Principal, Purvin and Gertz:

"Given the time of year it was really a rubber stamp meeting."

"I would be very surprised if there was a strong reaction to this as the decision was already priced into the market. In 2010, we're going to see some recovery in demand, especially in the far east, but the recovery in developed economies is likely to be a slower process. I don't think there will be any radical change in the market between now and OPEC's next meeting in March. There is likely to be a gradual firming in prices over 2010 as demand recovers but it's very unlikely there's going to be an extreme spike in prices unless there is some sort of supply disruption."

"In 2010 we're forecasting demand to grow by 1.5 million barrels per day as opposed to a 1.6 million barrel contraction in 2009 -- a net 3 million barrel swing should start to have an impact on the high level of global oil inventories."

Eugen Weinberg, Oil Analyst, Commerzbank:

"It might be taken negatively by the market, because they should have left themselves some room and raised their production goals. In fact, they now leave themselves less room for manoeuvres going forward. Should oil prices drop further next year, they wouldn't have an instrument to stabilise the price environment."

Tony Machacek, Broker, Bache Commodities, London:

"OPEC has agreed to keep the output unchanged -- no surprise at all. It is a little bit of a slow market anyway. The market would have been really surprised if OPEC did something other than the roll over. I don't really see any potential bullish or bearish implications for the market."

Amrita Sen, Commodities Analyst, Barclays Capital, London:

"This is exactly as expected and there is very unlikely to be much price reaction. I think OPEC ministers will be very happy with what they have achieved this year. Prices are fairly comfortable between $70 and $80 per barrel and the ceiling for prices is getting higher. The bottom of the market at the moment is definitely $70 per barrel."

David Wech, Head of Energy Studies, JBC Energy In Vienna:

"I wouldn't expect any big impact on prices because this decision was so widely anticipated. I certainly don't see much upside from this. It was always very clear that they would roll over current output targets."

Edward Meir, Senior Commodity Analyst at Brokers MF Global:

"We suspect the ensuing price bias will be to the downside. In the least, participants may be unnerved by OPEC's continuing refusal to tighten export quotas, and in fact, given energy's bearish fundamentals, the cartel is lucky prices are not lower than they actually are," he said in comments published just before the meeting.

"This is thanks mainly to a set of exogenous variables that have more than offset the negative fundamentals, including such things as the weaker dollar, (notwithstanding its recent strength), investor infatuation with commodities, and a return of fund money to the commodity space." (Reuters)