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