OPEC agreed to hold output targets steady after top exporter Saudi Arabia looked to economic strength to bolster the oil price and dismissed bulging inventories.
As widely expected, the roughly three-hour meeting begun late on Wednesday saw no need to change production formally, although some OPEC members called for stricter compliance with existing curbs.
From the outset, ministers, led by top exporter Saudi Arabia, said high oil prices of above $71 a barrel meant there was no need for action.
Saudi Oil Minister Ali al-Naimi said the price was being driven by economic recovery and high levels of inventory had become irrelevant to the market.
“You guys must realize that there is a fundamental change in the market. Economic growth is the name of the game, that's what's going to drive the price. As long as economic growth is there, the price is going to go up,” Saudi Oil Minister Ali al-Naimi told reporters.
“We are happy where it (the price) is, and it's going to be there for a while.”
But he said he did not expect a re-run of the rally to nearly $150 in July last year, which was followed by a crash to just above $32 a barrel in December.
The market collapse spurred the group to announce late last year it was implementing record cuts of 4.2 million barrels per day (bpd) from September 2008 production.
Those cuts have been in place all this year, but the group's compliance with them has fallen from a peak of 80% to less than 70% as the price has strengthened.
The lapsing discipline has contributed to an inventory build that has taken stocks to the equivalent of nearly 62 days of forward cover, according to the International Energy Agency -- around 10 days more than OPEC has typically viewed as comfortable.
Naimi said, however, 52-53 days of forward cover was now “too tight” in the light of changing market conditions and current inventory levels were not a worry.
Algerian Energy and Mines Minister Chakib Khelil took a similar view.
“In the past, we had a correlation between stocks and prices. As stock levels increased, prices went down. Then in early 2009, we just saw something different. So, it's very difficult now to say that 62 days is bad,” Khelil told Reuters.
As oil and other markets have rallied in response to increased confidence about the world economy, OPEC has raised its price ambitions.
Early this year, when the economy was still fragile, Saudi Arabia said it could tolerate oil prices of around $50 a barrel.
By May, as the world's finances began to recover, it was setting its sights on roughly $75 as a reasonable level for producers, needing to invest in new supplies, and consumers reeling from the financial crisis unleashed after the collapse of Lehman Brothers on September 15 last year.
Analysts said OPEC, which supplies more than a third of the world's oil, was still wary of acting too aggressively and damaging an economy that is still healing.
“They'd certainly like it (inventory levels) to be down around the average 5-year range. But they don't want to come down too fast,” said David Kirsch, director of Market Intelligence Services at PFC Energy.
“They don't want it to be too tight too soon and they don't want to get too far ahead of the global economy and demand.” (Reuters)