RIYADH, Dec 16: Despite the calls from within Opec to go for a kill and reinforce markets with an immediate output cut, the decision by the oil cartel to defer implementing the cut of only 500,000 bpd until February, once again underlined the thinking at their Vienna headquarters.

The Opec wants to play a balancing act and aspires for recognition from the industrialised world too.

By postponing a further output cut until peak winter demand has passed, the Opec acknowledged the concern in the market that a cut now could hurt the global growth. Further, crude prices had also stabilised considerably somewhat in the recent weeks.

Just before the meeting the IEA asserted in a report that oil stocks in the OECD countries fell by 40 million barrels in October and the trend continued even in November.

By taking the decision to defer the output cut the oil cartel almost out manoeuvred the markets once again.

Preceding the Opec meeting, termed ‘crucial’ by many, conflicting signals from within were confounding an already perplexed market. To cut or not to cut remained the major issue amid calls from major consumers, including the US energy secretary and the IEA, to defer the decision until at least the next meeting.

The Opec has become quite apt at keeping the markets at bay, guessing its moves until the last moment. On various occasions in the past it had taken decisions, almost diametrically opposed to what the ‘pundits’ have been expecting. Indeed, the Opec pundits look at the facts with a different glass. It was no different this time too.

A number of issues weighed on the minds of Opec ministers when they met in Abuja, Nigeria, late on Wednesday for the two day regular session. Before deciding on the million dollar question, ‘to cut or not to cut’ and if yes, to what level, the Opec ministers needed to take account into several factors.

These included ample US oil stockpiles, the weakening dollar, slower-than-expected world economic growth, forecasts of strong non-Opec oil production growth and calls from the US and others not to cut output at this stage.

Although there were other issues too on the agenda, yet the sticking point was the output decision for the next quarter. The question what could be a satisfactory price level from a producers’ view point remained a tricky one, yet the ministers needed to handle the issue before reaching a conclusion on the output issue.

In fact before coming up with a ‘fair’ answer to the output question they had to decide amongst themselves what would be a ‘fair’ market price of their asset – black gold. This basic question has been confronting the Opec for some time now. And this meeting was no different.

Prince Turki al-Faisal, the current Saudi envoy in the US, had publicly stated a couple of weeks back that Saudi Arabia, the Opec kingpin would be satisfied with a $60 a barrel market price for crude. Indeed, there were reasons for the dove to be that contended. A long-term approach required them to be prudent.

In order to sustain the lifecycle of their major trading product – crude – they needed to ensure a price bearable for the markets.

They further had in mind that too steep a price could jump start the development of alternative energy sources. The message from Saudi Arabia thus was simple; producers need not perform hara-kiri and that too publicly, by contributing to a premature end of the oil era, by taking the benchmark too high.

However, not every one was contended with this argument. And indeed they had ample ammunition too. Some Iranian officials have been expressing to keep oil prices at least above $70 a barrel mark.

Oil prices should climb back above $70 a barrel as a result of winter weather in the northern hemisphere and Opec output decisions, Gholam Hossein Nozari, managing director of Iranian state oil company NIOC had publicly said earlier the week.

Then there was the issue of the falling dollar and the rising crude reserves too.

The weakening dollar also must also have weighed heavily on the minds of the Opec ministers. After all, oil is still traded in US dollars and a weakening dollar hurts the oil producers, as much as it hurts some others. And the dollar is currently at a 20 month low against the euro.

“The dollar is (not) helping. It affects (our) revenue(s). If there is a significant drop, it is of concern,” the UAE Oil Minister Mohammad al-Hamli said earlier.

Bulging oil inventories in the United States was also under microscope during the meeting. Saudi Arabia has publicly expressed its concern at the current stockpile.

Saudi Oil Minister Ali Naimi said before the meeting, the market was ‘significantly’ out of balance because of swelling global inventories. Saudi Arabia appeared more concerned at the stock level in the market, as a guideline, and not the prevailing oil prices, analysts said before the Abuja meeting.

Qatar Energy Minister Abdullah Hamad Al-Attiyah also agreed with Saudi position that inventories were ‘very high’.

There were others, including Libya who was looking at the market rather differently. A Libyan energy official remarked that the markets seemed balanced and there was no need for the Opec to cut output any further.

These confusing signals made the task of the ministers’ still difficult. In the view of all this, the decision by Opec could at least be termed as ‘balanced and considerate.’ The Opec continues to chart a sensible course, one has to concede.