Opec unlikely to cut supply, analysts say

22 May 2009

The recent recovery in oil prices means that Opec is unlikely to implement any further production cuts at its next meeting towards the end of this month, analysts have said.

Members will come together on May 28th to discuss the state of the oil market and consider whether any reduction in output quotas is necessary to help drive up prices and encourage new investment.

But according to a Bloomberg survey, 25 out of 27 market experts polled believe that the cartel will retain its current production targets, focusing instead on ensuring tighter compliance with existing cuts.

Head of oil market research at Societe Generale Mike Wittner said any further reduction in output is unlikely given the recent recovery in oil prices, even though stockpiles remain high.

"Crude prices that have touched $60 (£38) and remain in the mid-to-upper $50s make it hard for Opec to justify another cut," he commented.

This could be good news for home heating oil customers, as any further cut in supply could drive crude prices up further.

US crude for June delivery closed at $61.05 a barrel on Thursday, while London Brent crude settled at $59.93.

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