OPEC leaves crude output targets unchanged

The 12-nation Organization of Petroleum Exporting Countries said "market fundamentals have remained weak," even though current oil prices at about $71 are roughly double their level since December, when the group announced a record 4.2 million barrel per day cut from September 2008 levels.

The upswing in prices was a blessing for the bloc — supplier of roughly 35 percent of the world's crude — but OPEC ministers noted volatility remained in the market and a delicate touch was needed to ensure that the uptick does not derail global economic recovery efforts.

The meeting's closing communique said "whilst there are signs that economic recovery is under way, there remains great concern about the magnitude and pace of this recovery," especially in the West. The group noted uncomfortably high crude and refined product levels, which reflect that refiners are not eager to churn out additional product.

"Since the market remains oversupplied and given the downside risks associated with the extremely fragile recovery, (OPEC) once again agreed to leave current production levels unchanged for the time being," the statement said.

The decision, announced in the early hours of Thursday, came as little surprise.

Saudi Oil Minister Ali Naimi, whose country is OPEC's biggest producer and its de facto leader, had sounded an upbeat tone about current crude prices and ruled out any possibility that a cut was in the offing.

OPEC ministers had indicated ahead of the meeting they were not intent on cutting quotas. Instead, the focus was on boosting compliance with production targets — seen as key to sustaining prices in a market swimming in crude and still exposed to volatility linked to weak demand, the fluctuation in the U.S. dollar and a global economic recovery that has yet to firmly take root.

The group — excluding Iraq — has set a production target of slightly under 25 million barrels per day, but has been overshooting that mark by about 1 million barrels per day, according to analysts.

The increase in inventories is a major challenge for OPEC, especially as the U.S. driving season winds down and refiners gear up for the winter heating-oil season with refined product inventories also high.

"When we look at fundamentals, we see this overhang with great concern," OPEC Secretary General Abdulla Salem el-Badri said. "Of course, when the conference takes a decision, we would like our members to adhere to the decision," he said, noting that compliance was good, but not excellent.

But el-Badri also stressed that the group was not ready to jeopardize the economic recovery efforts by pushing for steep cuts.