It was pretty clear in the runup to OPEC's September 9 meeting that ministers were not going to change quotas.
But, given that there had been a lot of comments from OPEC ministers about falling adherence to those quotas and high inventories in the industrialized countries, it had been expected that the communique would call for stricter compliance.
Not a bit of it. Indeed, said Saudi Arabian oil minister Ali Naimi this week, compliance levels were "perfect" at around 70%.
Back in May, Naimi estimated compliance at around 80%, which he described as "good," but said he would like to see an even higher rate.
So what has changed? Why has OPEC blithely ignored increasing leakage beyond its official 24.845 million b/d target production?
Oh, of course -- and to quote a well-worn phrase, "it's the economy, stupid!"
In rolling over for the third time this year its 4.2 million b/d output cut deal of last December, OPEC sidelined gloomy oil market fundamentals and put the fragile global economy at the top of its list of concerns.
That concern will also be a key factor when OPEC next reviews output in Angola on December 22, according to the group's secretary general, Abdalla el-Badri, who said OPEC could not take any action that might jeopardize economic recovery.
But if OPEC's official production target remains the same as it was at the beginning of January this year, actual output is estimated to be a lot higher.
Earlier this week, a monthly Platts survey pegged August output from the 11 members bound by quotas at 26.24 million b/d -- equivalent to a compliance rate of 66.8%. In March, compliance had peaked at around 82% but slipped back after that.
Assuming OPEC production continues to rise, should someone be asking this question: At what point does compliance become an issue again?
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