Commentary 1: The article deals with the OPECs decision to keep production quotas unchanged as the market is oversupplied with crude oil. Abiding by the fundamentals of supply[1] and demand[2], the worry of the OPEC member states involves

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IB Economics SL

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Commentary Number:    1    

Today’s Date: Thursday, October 8, 2009

Extract Title: OPEC leaves output targets unchanged, citing oversupply and slow recovery

Extract Source: http://ca.news.finance.yahoo.com/s/09092009/2/biz-finance-opec-leaves-output-targets-unchanged-citing-oversupply-slow.html

Extract Date: Wednesday, September 9, 2009

Commentary Relates to Syllabus Sections:   1, 2

Commentary Word Count:  745 words

OPEC leaves output targets unchanged, citing oversupply and slow recovery

Wed Sep 9, 10:52 PM                  
Tarek El-Tablawy, The Associated Press

VIENNA - OPEC on Thursday decided to leave its production quotas unchanged, opting to take a cautious approach in a market awash in crude and a global economy still in the nascent stages of recovery.

The 12-country Organization of Petroleum Exporting Countries said "market fundamentals have remained weak," even though current oil prices at about US$71 are roughly double their level since December, when the group announced a record 4.2 million barrel per day cut from September 2008 levels.

The upswing in prices was a blessing for the bloc - supplier of roughly 35 per cent of the world's crude - but OPEC ministers noted volatility remained in the market and a delicate touch was needed to ensure that the uptick does not derail global economic recovery efforts.

The meeting's closing communique said "whilst there are signs that economic recovery is under way, there remains great concern about the magnitude and pace of this recovery," especially in the West. The group noted uncomfortably high crude and refined product levels, which reflect that refiners are not eager to churn out additional product. 

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"Since the market remains oversupplied and given the downside risks associated with the extremely fragile recovery, (OPEC) once again agreed to leave current production levels unchanged for the time being," the statement said.

The decision, announced in the early hours of Thursday, came as little surprise.

Saudi Oil Minister Ali Naimi, whose country is OPEC's biggest producer and its de facto leader, had sounded an upbeat tone about current crude prices and ruled out any possibility that a cut was in the offing.

OPEC ministers had indicated ahead of the meeting they were not intent on cutting quotas. Instead, ...

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