Crude oil for April delivery rose to US$48.14 a barrel on the Nymex over the weekend, after rising by almost US$5 to US$47.03 - the most since February 19. Crude oil prices moved up for the second consecutive day on the eve of this weekends' OPEC meet to consider a production cut in Vienna on March 15.
The International Energy Agency has slashed oil demand forecast for 2009 for a seventh month, a decline that will be matched by lower non-OPEC supply. OPEC has also reduced its 2009 oil demand forecast by 520,000 bpd to 84.6 mln bpd. Since the global market is oversupplied, few members of OPEC seem to be in favour of lowering production, while others seem to favour to halt to reductions. Several feel that OPEC may choose to enforce existing quotas rather than cut output further.
The 11 OPEC members pumped 25.7 mln bpd day last month, as compared with their official Jan. 1 limit of 24.845 mln bpd- indicating an 80% compliance of its production targets.
The effect of lowered output is just beginning to be felt in the markets of USA and Europe because of the time lags involved in moving oil from the Middle East. Volumes of oil arriving in USA and Europe will continue to fall in the weeks ahead. Budgets at many OPEC countries have been squeezed hard over the last few months because of lowered oil prices. Economists calculate that at US$40 per barrel, 11 of OPEC's 12 members, as well as Russia and Mexico, face budget deficits.