OPEC bows to weak economy, Obama effect
OPEC’s decision on Sunday to resist new supply cuts laid the ground not just for cheaper oil to help heal the economy, but for warmer relations with the world’s biggest energy consumer.
Two days after U.S. President Barack Obama called Saudi King Abdullah, OPEC said it would stick to existing supply targets, even though fuel inventories have swollen and oil prices are much lower than it would like.
The Organization of the Petroleum Exporting Countries said the weakness of the world economy, which effectively receives a financial stimulus from cheaper oil, was a central motivation.
It also gave a tentative welcome to the new U.S. administration.
“I don’t want to say that I voted for Obama, but we can see a different tone … that we didn’t see in the past,” OPEC Secretary General Abdullah al-Badri told reporters.
“We have seen a positive approach. They are ready for dialogue and we are ready for dialogue and ready for talk.”
U.S. Energy Secretary Steven Chu said he was pleased with OPEC’s latest output decision, although he restated the U.S. commitment to ending its dependence on foreign oil.
For OPEC, as for the rest of the world, the real issue was the economy, analysts said. Sheer self-interest dictated the group needed to avoid the kind of damage to growth that would only further limit energy consumption no fax payday loan.
“At the moment, getting the world back on its feet is more important than lifting the oil price by a further $10 a barrel,” said Lawrence Eagles of JP Morgan in New York.
“The world economy is crucial. Short-term gain would be to the long-term detriment of OPEC.”
But analysts also said any gentle pressure from Obama, as opposed to from former president George W. Bush, might have been less disruptive to the producer group’s debate, making consensus easier to achieve.
As well as U.S. ally Saudi Arabia, OPEC’s members include established U.S. adversaries Venezuela and Iran, who went along quietly with Sunday’s OPEC decision.
G20 MEETING
Sunday’s talks against the backdrop of oil prices around $45 a barrel and shrinking demand as the weak world economy saps energy consumption stood in marked contrast to a meeting in Vienna almost exactly a year ago.
Before the meeting in March 2008, Washington had said even a modest output increase would help to calm oil markets, but OPEC instead kept supplies steady. In response, prices leapt to what was then a new record above $100 a barrel.