DAVOS, Switzerland (Reuters) - OPEC is expected to have fully delivered on its pledged supply curbs by the end of this month, said the group’s Secretary-General on Wednesday, but a weak economy would continue to erode demand for fuel.
Abdullah al-Badri told reporters at the World Economic Forum in Davos that even an oil price of $50 a barrel was still too low to encourage investment in new supply. Oil was trading around $42 on Wednesday.
OPEC agreed last month at a meeting in Oran, Algeria, to cut output by 2.2 million barrels per day (bpd) from January in a bid to prop up prices that have collapsed by more than $100 a barrel since the summer.
“Our compliance is excellent ... The way I see it, the 2.2 million barrels agreed in Oran will be 100 percent implemented,” he said. “I hope that by the end of January, we will have taken out 4.2 million barrels per day.”
The reduction of 2.2 million barrels per day (bpd) is in addition to cuts of 2 million bpd agreed in September and October.
“I hope that maybe after the 2.2 million bpd cut is implemented, somehow the balance will go back to the market,” he said.
The Organization of the Petroleum Exporting Countries meets next on March 15 in Vienna.
A global economic slowdown has battered demand worldwide and Badri saw little hope that oil prices would revive until the economy improves.
“If there’s no recovery in the world economy there will be no recovery in oil,” he said.
“We’re still seeing destruction of demand, but we hope that maybe by the end of 2009 or the beginning of 2010 we will see a pick up.”
The OPEC chief reiterated concern that the collapse in oil prices would discourage investment in new energy projects, a factor some in the industry believe may cause prices to surge in future when demand recovers.
“A lot of projects will be delayed or cancelled. Of course countries will think why add more capacity if it’s idled,” Badri said.
“At this time, even $50 is too cheap. If you want to be ready when there’s a pick up in demand you have to have capacity ready for that.”