OPEC ministers agreed not to change output targets they are already exceeding, an OPEC delegate told Reuters Wednesday, as demand should pick up later in the year to mop up extra barrels.
But with economic recovery still looking fragile as powerhouse China considers curbs on credit, members are likely to be asked to comply with production levels set in December 2008 to keep supply at 24.84 million barrels per day (bpd).
Good demand, reliable supply, beautiful prices -- we are very happy, Saudi Arabian Oil Minister Ali al-Naimi said just before entering the meeting.
Benchmark crude futures traded at over $82 per barrel -- in the area that OPEC's biggest exporter considers appealing to both consumers and producers alike, despite overproduction by OPEC.
A nascent recovery in the global economy in the last year and rising prices have encouraged revenue-hungry OPEC members to pump more oil and in February they were making just 53 percent of promised cuts of 4.2 million bpd.
Everything is relative -- if there was no demand there would be no leakage, said Naimi.
Saudi Arabia, OPEC's biggest producer, is pumping around 8.1 million bpd -- more than twice its nearest competitor in the group, Iran, but closer than many to its target level.
The kingdom has plenty of spare capacity which makes it the most flexible member of the group to meet consumption changes.
Naimi said he expected world oil demand in the second half of this year to grow by about a million barrels per day, adding he thought growth would be mainly from Asia.
The International Monetary Fund (IMF) expects China's economy to expand 10 percent this year. while OECD head Angel Gurria is forecasting global growth of 4 to 4.5 percent this year because China and India are pulling very hard.
There are concerns, however, that China might curb credit in an effort to restrain its inflation, which now looks set to be 3.7 percent in 2010, the World Bank said Wednesday, up from a previous estimate of 2.0 percent.
While there has been improvement in the oil market outlook in recent months, there is still a long way to go before we can feel at ease with the situation, OPEC President Germanico Pinto said in a speech before the meeting started.
The issue of exit strategies from stimulus packages of a year ago and the right timing of adjustment is becoming a key factor in the recovery of prices, he added.
OPEC is responding to growth in the same way central banks are, in some way. They don't want to move until a nascent expansion turns into a more solid expansion, they don't want to raise production too soon, said Jason Schenker, president of Prestige Economics.
Ministers have said there should be no need for any extra OPEC meetings this year with the next scheduled check-up due in September -- after the traditionally weak second quarter.
OPEC will also meet in Quito, capital of the president Ecuador, in the second or third week of December.