OPEC oil cartel decides to keep production at current level

VIENNA (AP) — OPEC oil ministers on Thursday avoided the temptation to cut crude production and trample on the seedlings of economic recovery. Instead, they bet on prices floating higher as the recession eases and demand for oil picks up.

With the world oversupplied with oil, Thursday’s meeting of the 12-nation oil producing cartel could have opted to tighten the spigots — an option it has often exercised to raise prices in past times of anemic demand.

An OPEC statement announcing the decision to keep production quotas at present levels noted that worldwide oil inventories at the end of last month were at a 20-year high.

But with the world still in the grip of recession, cutting back production could have backfired by spiking prices and prolonging any economic uptick. That, in turn, could have directly hurt OPEC by further reducing the world’s capacity to pay for costly crude and leading to an even greater overhang in supplies.

The oil ministers instead opted to sit back and wait, in a decision driven by the belief that the U.S. — the world’s largest oil consumer — is gradually emerging from a severe recession and that demand there will support oil prices.

“We think that the economy, especially the American economy, is going to pick up,” said Shokri Ghanem, Libya’s top oil official, while OPEC Secretary General Abdalla Salem El Badri spoke of “a light in the end of the tunnel.”

“We don’t want to give a wrong signal to the market,” El Badri said, when asked why the Organization of the Petroleum Exporting Countries decided against cutting production despite their concerns about significant oversupply and weak demand from the U.S. and other major consumers hobbled by the recession.

OPEC President Jose Maria Bothelo de Vasconcelos — who is also oil minister of Angola — voiced the same message. He said the decision to maintain targets “sends a signal of the optimism that all members of the organization are currently feeling” about the chances of an approaching economic upturn.

A barrel of crude already fetches more than $60 compared to levels near $30 just four months ago.