OPEC PREVENTS CRASH !!!

OPEC ministers prevented a crash of most crude producing economies by agreeing on Sunday to leave existing output targets unchanged, but promised to enforce those curbs more strictly and said they would meet again at the end of May, it makes no sense to propose a cut if previous agreements have not been fulfilled..

The decision finally reflected concern for the world economy and a belief production curbs so far have begun to take away some of the over-supply from oil markets, the Organization of the Petroleum Exporting Countries said in a communique after the nearly five-hour conference.

OPEC adherence has been estimated at roughly 80 percent and full compliance would take away up to a million bpd more.

For consumer nations, cheaper oil equates to a huge financial stimulus.

Barack Obama, president of the world's biggest energy consumer the United States, called Saudi King Abdullah last week.

The White House did not disclose the contents of the call, but analysts said the timing was significant.

They predicted leading OPEC producer Saudi Arabia would not want to be seen to be destabilizing the economy ahead of a Group of 20 summit in London in April, to which the kingdom is invited to help seek solutions to the world's financial crisis.

The International Energy Agency (IEA), which advises consumer countries, in a report on Friday said the OPEC supply curbs already in place were enough to shrink oil stocks in developed nations even though it expected 2009 demand to fall by a million bpd compared with last year.

OPEC's cuts since last September have helped to pull prices up from a low of $32.40 in December, however if crude prices go beyond the $50 mark world recessing will be agravated, crude demand will fall more than 7% this will cause a OPEC "CRASH" from which the cartell will never recover.

But levels are still just over $100 below last year's record high of nearly $150 and the group cannot forget the price crash of the late 1990s when oil fell toward $10 a barrel.

Although cheaper oil in the short term can help offset what the OPEC statement referred to as "the worst global economic recession in decades," OPEC says the risk for the longer term is that it inhibits investment in new production, which will drive the price back up again.

This attitude by OPEC may lead to lower prices, but I think the stimulus to the economy will help increase demand for oil down the road...