Oil up, stockpiles and OPEC credibility down

Oil prices edged up marginally on Wednesday after U.S. stockpiles showed a surprising decline in November and Qatar's oil minister hinted that new OPEC production cuts were imminent.

A barrel of crude oil for January delivery rose 90 cents to $47.86 US in morning trading on the New York Mercantile Exchange. The increase came after the U.S. Department of Energy said oil inventories fell by 400,000 barrels in the latest week. Crude watchers had expected crude stockpiles to rise by two million barrels.

Industry experts often use inventory levels as a proxy for crude demand.

Qatar's oil minister said this week that the Organization of Oil Exporting Countries would probably look at reducing member output further when the group meets in Algeria on Dec. 17.

“For sure we will cut in Oran [Algeria],” Abdullah al-Attiyah told Reuters at a petrochemical conference in Dubai. “I don't know by how much. We will discuss it there.”

OPEC has been struggling with ways to provide some support for a plunging world oil price. What peaked at $147 during the summer is now almost $100 lower as the global economy slowed demand and speculators stopped plying their trade.

The cartel wants a per-barrel value high enough to maximize revenue but not so high as to choke off demand. Saudi Arabia, OPEC's biggest producer, is eyeing a price somewhere in the range of $75 a barrel as ideal.

Cuts that don't draw blood

The organization, however, faces problems in promising to cut output and then getting its members to follow though on those reductions.

Back in November, OPEC pledged to reduce production by 1.5 million barrels per day. So far, however, member nations have chopped output by only 66 per cent of that target.

Supply from OPEC fell to 31.2 million barrels per day in November from 32.17 million barrels a day in October, according to a recent survey of oil firms, OPEC officials and analysts.

Saudi Arabia and other less-populous nations, can meet their smaller quotas, experts said.

Poorer countries with larger populations, such as Nigeria and Indonesia, however, need to keep their black gold flowing to export markets in order to maintain their market share and to keep their public treasuries as full as possible.