For a change the decision was simple and straightforward — yet the meeting continued into the early hours of Thursday. Evidently at the ministerial meeting in Vienna, there were issues besides just rolling over the quota.

Clarifying the decision, OPEC said: “Since the market remains oversupplied and given the downside risks associated with the extremely fragile recovery, the conference once again agreed to leave current production levels unchanged for the time being.”

“While there are signs that economic recovery is on the way, there remains grave concern about the magnitude and pace of this recovery, especially in the major industrialized nations of the OECD,” it conceded.

A number of factors were weighing on the ministers’ mind that evening. The slumping dollar definitely remains an issue for the oil producers. In the recent past, supply and demand fundamentals have often been overshadowed by investors using crude as a hedge against fluctuations in the dollar. Kuwaiti Oil Minister Sheikh Ahmed Al-Abdullah Al-Sabah had a point when he told the press that oil was now more a financial instrument than a commodity.

The “somewhat” global economic recovery, though still fragile, has also helped the oil cause in recent weeks. And this helped the International Energy Agency (IEA) raise its estimate of global oil demand in 2009 and 2010, mainly on unexpectedly strong economic signals from China and the United States. The IEA revised its oil demand forecasts up by nearly 0.5 million barrels per day to 84.4 mb/d for 2009 and 85.7 mb/d for 2010. Yet it continued to insist that demand in other major economies still remained weak and any recovery would be slow and fragile.

The mood in the meeting room was both somber and relaxed, analysts at the OPEC headquarters this Wednesday evening strongly felt. Price was not the major concern and definitely did not overshadow the discussion. Most felt satisfied, and with the global crude markets in “good shape” oscillating in the $68-73 price range, fireworks could definitely be missing, one could safely deduce.

OPEC at the moment appears to be cruising in a strategic direction — not to tamper with the market forces until “absolutely essential.” With demand beyond its control, it fully realizes and concedes it cannot have complete sway on markets. Similarly non-fundamentals are also impacting the markets. The only tool available to OPEC at the moment is the supply side of the dynamics and it is required to use this rather deftly.

Indeed OPEC politically could not have afforded tightening the markets and taking the blame for derailing the nascent global recovery — if any. Too many critics were ready to pounce on the group — no cartel please — and indeed OPEC could not have afforded providing additional fodder to such pundits last Wednesday.

Any reduction in supply could also send the wrong signal at the wrong time to the markets; it could have indicated OPEC has strong doubts about economic recovery. OPEC thus had few options — other than rolling over.

But before reaching the decision, OPEC needed to put things in order, too. The OPEC compliance with output quota is slipping in recent months from the historic heights achieved earlier in the year. The OPEC 11, bound by quotas, pumped 26.055 million barrels a day in August, according to estimates in a Bloomberg survey, indicating a 71 percent compliance — down from the 80s recorded in March and April.

Quota compliance had been the focus of much of the group’s efforts since it announced in December a record 4.2 million barrels per day output cut from September 2008 levels. Kuwait’s oil minister in a pre-meeting statement had already hinted on the emerging consensus within the group to enforce greater quota compliance.

Up to now, Riyadh has been taking lion’s share, sacrificing in the process its market share, ceding the status as the world’s biggest exporter of crude and fuel to Russia for the first time since the collapse of the Soviet Union. Saudi crude exports to the US too fell in June to their lowest since 1998, recent US Energy Department data indicated.

Others too were required to join the efforts, as the global market remained “a little bit” oversupplied, Saudi Oil Minister Al-Naimi has been asserting last week in Vienna. The signs are all around. As per IEA figures, stockpiles in the world’s most advanced economies equaled about 62 days of consumption, considerably above the stated OPEC target of between 52 and 54 days of consumption.

Markets reacted buoyantly to the OPEC decision. New York’s main contract, light sweet crude for October delivery jumped $1.12 to $72.43 a barrel while Brent North Sea crude for October rose 82 cents to $70.65 in the immediate aftermath of the move. Though it slipped below $72 a barrel early on Friday, snapping a three-day winning streak, as investors questioned, and perhaps rightly too, whether the pace of demand recovery justified current prices.

With price in the target band, things appear well in control for OPEC — at least for the time being. From the depressing days of December last year, things have definitely moved a lot ahead. In the meantime, one cannot help underlining, OPEC has played its cards well. Yet the issue of quota busting could derail and stifle the recovery — one can’t help pointing this out to the OPEC stalwarts. It remains a point of concern and is better tackled now than later.

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