Divided OPEC opens the taps oil prices slide
Divided OPEC opens the taps oil prices slide
VIENNA (Reuters): OPEC bowed to U.S. pressure for cheaper oil on Wednesday, agreeing higher output limits that sent petroleum prices into an immediate tailspin.
Iran, the cartel's second largest producer opted out of the deal, saying it feared a price plunge and complaining about interference from Washington.
OPEC won applause from the Clinton administration which said there was now no need to release national emergency supplies to ease election year political pressure from consumers irate at high gasoline prices.
"This decision was made in the interests of producers and consumers in a prudent way. It will have a positive impact and moderate prices," Saudi Oil Minister Ali al-Naimi said after the conference ended in the early hours of Wednesday morning.
President Bill Clinton said: "These increases will help sustain worldwide economic growth and provide greater balance between oil supply and demand."
Robert Priddle, head of the West's energy watchdog, called the deal a "step in the right direction" but said he was still worried about a shortage of petroleum inventories.
Naimi said OPEC was aiming to keep the price of benchmark North Sea Brent in the range $20-$25 a barrel compared to a recent nine-year high of $32.
It did not take long for oil traders to grant the Saudi minister his wish. Brent futures slumped to $24.64 a barrel, down 87 cents in early Wednesday trade.
"We're going to see a stockbuild in the second quarter. I would not be surprised to see Brent at $21-$22," said Gary Ross, head of New York oil consultancy Petroleum Industry Research Associates.
The OPEC oil production boost has had minimal impact on Asia's markets thus far, although traders said spot crude prices may head a little lower on the news.
The increase was within market expectations of an increase of 1.2 million to 1.7 million barrel per day so Asian crude traders said they don't expect rash or immediate action by buyers or sellers.
"We were expecting this increase, (and) nobody seems to be in a panic to buy or sell," said one Tokyo-based trader with a Japanese refiner.
In Wednesday's agreement OPEC said nine members, excluding Iran, would immediately turn up the taps by 1.45 million barrels daily, or seven percent.
That relaxes output curbs made a year ago and increases the flows among nine members to 21.069 million bpd. Ministers will meet in Vienna in June to review output policy.
Iran, complaining of U.S. interference, pulled a last minute surprise by opting out of the accord, refusing to close the gap between its position on the output rise and the rest of OPEC.
Nevertheless, the Islamic republic said it would raise production at the allocation in any case from April 1. That will add another 265,000 barrels daily.
"We will not lose market share," said Iran's OPEC governor Hossein Kazempour Ardebili. "We will certainly do the increase that would have been allocated (and) we will consider our position on increasing beyond that."
Kazempour said: "The U.S. intervention was beyond expectations. Never in the history of OPEC has this been experienced before. There was a lot of resentment and a lot of resistance."
After two years of cohesion that have pulled prices from historic lows, Iran's move will revive OPEC's image as a fractious cartel bedeviled by political differences and perennially at odds over output policy.
"We hope that very soon these small differences that occur even among the best families will be resolved," said Venezuelan Oil Minister Ali Rodriguez.
"OPEC should try to get away from being a political football in U.S. domestic elections," said Mehdi Varzi of Dresdner Kleinwort Benson.
Non-OPEC Mexico and Norway, having cooperated with OPEC in cutting exports when prices crashed, are shortly expected to announce their own supply increases.
Ross of PIRA said net new OPEC oil could be expected to rise by about a million barrels a day. That is not as much as OPEC is offering on paper because of recent leakage over official quotas.
U.S. Energy Secretary Bill Richardson said Washington had withdrawn its threat to release crude from the national strategic petroleum reserve. He predicted a 28 cent fall in U.S. wholesale gasoline prices by December.
OPEC new production levels
March 2000 March 1999
Algeria 788 731 Indonesia 1,280 1,187 Kuwait 1,980 1,836 Libya 1,326 1,227 Nigeria 2,033 1,885 Qatar 640 593 Saudi Arabia 8,023 7,438 UAE 2,157 2,000 Venezuela 2,845 2,720 Iran n/a 3,359