Jose Maria Botelho de Vasconcelos, Angola’s oil minister and OPEC president (L) and Abdalla El-Badri, OPEC secretary-general, arrive for a news conference in Vienna, Austria, Thursday.

OPEC decided to keep production quotas unchanged at Thursday’s meeting in Vienna, banking on a recovery in oil demand toward the end of the year.

“The market is oversupplied, it’s true,” OPEC Secretary General Abdalla el-Badri said at a press conference after Thursday’s announcement. The group decided against cutting output in the face of excess supply to avoid sending the “wrong signal” and disrupting an economic recovery, he said. “If we are able to keep this US$60 to $70 price for the remainder of the year, it will be fine.”

Oil futures in New York have gained 43 percent this year on speculation that demand will revive as the global economy starts to recover. Crude oil rose to a six-month high after Thursday’s OPEC decision. Crude oil for July delivery rose 25 cents, or 0.4 percent, to $63.70 a barrel at 9:11 a.m. on the New York Mercantile Exchange. Futures reached $63.93, the highest since November 10.

“I don’t think there was any way they could justify cutting again at $60- plus crude,” said Mike Wittner, head of oil research at Societe Generale SA in London. “If they can maintain discipline and limit the production creep that comes with higher prices, stocks should start to come down.”

OPEC has yet to complete previous reductions that came into effect at the start of the year.

April increase

The 11 nations bound by quotas, which exclude Iraq, pumped 25.81 million barrels a day in April, about 225,000 more than March and the first increase in nine months, according to OPEC’s latest monthly report. The countries have a total target of 24.845 million barrels, Saudi Arabia’s Naimi confirmed Thursday. That means the group has completed 77 percent of its cuts, down from a revised 82 percent for March.

Nigeria’s oil minister supported OPEC’s decision to keep production quotas unchanged, saying he’d like compliance with output targets to be 100 percent “if possible.”

Nigeria is currently pumping 1.7 million to 1.8 million barrels of oil a day, Minister of Petroleum Rilwanu Lukman said Thursday in an interview following the OPEC meeting.

The International Energy Agency cut its oil-demand forecast for a ninth consecutive month in May, predicting consumption this year will fall the most since 1981.

US recession

Oil supplies fell 2.82 million barrels to 364.7 million in the week ended May 22, the industry-funded American Petroleum Institute said Thursday. US gasoline supplies dropped 758,000 barrels last week to 205.4 million, the API said.

The US recession will probably end in the third quarter, a survey of business economists showed.

“We are seeing light at the end of the tunnel,” el-Badri said at Thursday’s press conference. While OPEC doesn’t have an official price target, oil is currently near a level that members can live with, he said.

”$70 is suitable,” el-Badri said. “We can invest and have a decent income” for our countries.

Saudi Arabia’s al-Naimi forecast that oil may rise to $75 a barrel by this year’s third or fourth quarter. “Prices are good, the market is in good shape,” Naimi said as he left OPEC headquarters Thursday. The group’s next meeting will be on September 9, he said.

“The outcome, no change in OPEC quotas, was expected, but the surprise was Saudi Arabia being very explicit about a price objective for the first time since the price band mechanism in the early part of this decade,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York.

Source: Bloomberg