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In a meeting starting yesterday and concluding this morning in Vienna, Austria, the Organization of Petroleum Exporting Countries (OPEC) decided to hold oil production steady for now. The next scheduled meeting of the group is on January 17. At that time, the board may even discuss cutting production.
While the results of the meeting and comments regarding potential actions going forward offered little hope to consumers suffering from high crude-oil prices, Saudi Arabia's oil minister, Ali Naimi, said OPEC will still try to keep crude prices between $22 and $28 a barrel.
Mr. Naimi also said future production increases would be decided by members of the organization, not necessarily by a formula they agreed upon earlier this year. That formula requires the organization to produce an additional 500,000 barrels a day if the average price per barrel of OPEC crude exceeds $28 for 20 consecutive trading days. "The price-band mechanism is still in place but it doesn't replace good judgment," Mr. Naimi said after Sunday's informal policy meeting.
Despite production increases, the price of oil remains above $30 a barrel. OPEC nations, which claim they are already pumping at nearly full capacity, blame surging oil prices on bottlenecks at refineries and high fuel taxes in many countries. Moreover, the cartel has been reluctant to boost production any more amid worries that an immediate increase could flood the market and cause prices to plummet if demand subsides, which is expected to occur in the spring.
The December Sweet Crude oil contract (CL/Z0) closed Friday at 34.02 per barrel and has found major support at the $32 level. Even the 20-week moving average of the contract sits around $31 and has not been broken to the downside since this past April. In early trading this morning, the spot oil price is at $34.25, up by 23-cents following OPEC's recent statements..