OPEC, Mindful of Politics, May Informally Cut in Coming Months

Mindful of the political challenge of slicing oil production at a time of triple-digit crude prices, OPEC may opt to informally trim in the coming months as it seeks to act ahead of an anticipated slowdown in energy demand.

The Organization of Petroleum Exporting Countries holds its second meeting of the year Wednesday as oil prices skirt all-time highs and a surge of investment suggests they could move higher still.
The price surge has come at a time when the oil producing body, which accounts for 40% of the world’s crude supply, might otherwise be considering a cut in production, with global oil inventories ample and a slowdown or possible recession looming in the U.S. economy.

Some voices within the group – principally Iran, Algeria and Venezuela – have come out in favor of a production cut now. But the oil price surge – New York crude futures hit an all-time inflation-adjusted high of $103.95 a barrel Monday – has rendered it politically difficult for OPEC to take barrels off the global oil market, a view endorsed by many ministers.

Still, analysts believe that with so many questions hanging over the U.S. economy and oil inventories in the world’s largest energy consumer once again on the rise, OPEC will push through a cut in production at some point.

Rigzone