Much is going well for Opec. By common consent, there is too much oil on the market, yet the oil price is remarkably steady around $80 per barrel. Even oil producers concede that $80 oil is rather high given the fragile state of the global economy. But the oil price reflects longer-term expectations of an economic rebound reviving demand growth and tightening the market, while ignoring the weak short-term fundamentals. Against this benign backdrop, Opec is unlikely to make any output policy changes at its meeting Mar. 17 in Vienna. Opec's last action was to cut a further 2.2 million barrels per day in December 2008, on top of previous cuts for a total reduction of 4.2 million b/d from actual output in September 2008. The cuts squeezed the combined target for Opec-11 - Iraq has no quota - to 24.845 million b/d. The restraint did the trick, stabilizing the oil price at around $40. By last spring prices were rising again as government bailouts revived a paralyzed financial system. Now oil demand is also rising again slowly and Opec members are leaking more oil onto the market. However, no new Opec action is expected, or necessary. "There is always the potential for a surprise, but the reality is that there is not a lot cooking," says Mike Rothman, president of Cornerstone Analytics.
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