Carola Hoyos Opec keeps oil output steady, but hints emerge between the lines

The Opec oil cartel’s decision to keep its output levels unchanged may not have come as much of a surprise. But those reading the group’s communique closely will find a few points that leave plenty of room for debate.

The group clearly stressed the possible downside of its decision, voicing “great concern,” calling the market “over supplied” and describing the recovery as “extremely fragile.”  The clincher, though, is that Opec said it would “leave current production levels unchanged for the time being.”

There are two things to note here. The obvious one is Opec is saying it stands ready to act if prices go south, as some analysts believe will happen. Less obvious is that Opec agreed to keep current production levels unchanged, rather than stating it would leave quotas where they were.

There may be two reasons for this:

1. Despite its cautious statement, the group feels that even with just 68 per cent compliance all is fine.

2. Opec wants to avoid the thorny issue of pushing others to comply, shoving the quotas under the carpet, just as Iran (5 per cent compliance) and Angola (0 per cent compliance) want.

My bet is on the latter. If oil traders agree, prices are likely to slip on Thursday in response.