Opec rules against cut

16/03/2009

The Organisation of the Petroleum Exporting Countries (Opec) has decided not to limit supply of crude any further.

At a general meeting in Vienna yesterday (March 15th), the cartel ruled that instead of imposing further constrictions, it would look to secure commitment to existing cuts.

Estimates put commitment to the current 4.2 million-barrels-a-day cuts at 79 per cent.

Commenting on the decision, Phil Flynn, an analyst at Alaron Trading in Chicago, told Reuters that Saudi Arabia had probably exerted its influence on other members after bearing the largest proportion of the cuts since September.

David Fyfe, head of the oil industry and markets divisions at the International Energy Agency (IEA), added: "I think generally speaking it's a sensible decision and one that the IEA could welcome given the strains that are being faced by the global economy."

Opec will meet again in May to assess whether the current cuts have been sufficient in supporting demand and raising crude prices.

Any such cuts would likely have a knock-on effect on DERV, petrol, farm diesel and heating oil prices.