The Organisation of Petroleum Exporting Countries (Opec) cartel’s call for compliance with recent production cuts could undermine a global economic recovery because oil prices could spike higher as a result, the Centre for Global Energy Studies (CGES) said on Monday.
Opec, which pumps 40% of world oil, called for full compliance with deep cuts agreed late last year when members met earlier this month in Vienna.
The 12-nation Opec cartel agreed to slash output by 4,2-million barrels a day from September in a bid to defend tumbling prices.
Questions remain about compliance because some cash-strapped member nations do not want to lose precious income.
“Opec left output targets unchanged but called for full compliance with last December’s agreement when it met in Vienna” on March 15, the energy consultancy CGES said in its latest monthly report.
“However, full compliance would send oil prices to levels that would undermine prospects of economic recovery.”
The global economic downturn has ravaged energy demand and slashed oil prices from record peaks above $147 in July 2008.
“Full compliance … would remove a further 1,1-million barrels a day of oil from the global market, according to the CGES’ assessment of Opec production, forcing a global stock draw of more than 1,5-million barrels a day this year,” the CGES warned.
“While this would normally lead to a healthy rise in oil prices, there are very real worries that — in the present economic climate — it would simply undermine the chances of recovery, raise the spectre of inflation and delay the upturn in oil demand that Opec member countries need more than anybody else.”
Opec chose earlier this month to delay an output decision, instead calling an extraordinary meeting for May 28 when the cartel’s ministers will reconvene in Vienna to assess the market situation.
The cartel’s official daily output quota currently stands at 24,84-million barrels. — AFP