OPEC contains oil price rise by pumping extra supplies

OPEC contains oil price rise by pumping extra supplies

Muklis Ali and Richard Mably, Reuters, Jakarta

OPEC is leaking extra supplies to contain high oil prices and
would prefer crude down about US$2 a barrel, OPEC President
Purnomo Yusgiantoro of Indonesia said on Thursday.

Purnomo, Indonesia's energy minister, told Reuters in an
interview that OPEC would prefer prices at $28 a barrel for a
basket of crude, down from more than $30 now.

"We would like to have prices a little bit down, at the top
end of the ($22-$28 OPEC target) range," Purnomo said.

"OPEC has contributed what is necessary to produce to
stabilize the price."

The Organization of the Petroleum Exporting Countries (OPEC)
faces a dilemma at a meeting next month when it may need to cut
production quotas to counteract a seasonal fall in demand in the
second quarter.

High world oil prices could make such a move politically
difficult, drawing criticism from major importing nations like
the United States.

OPEC's reference basket was last valued at $30.23, well above
its official target range of $22-$28 a barrel. Benchmark U.S.
crude futures traded on Thursday at $33.76 a barrel after hitting
a nine-month high this week of $34.35.

Washington questioned OPEC policy last month after the cartel
said high prices were justified by the weakness of the U.S.
dollar, the currency of world oil trade, which had hurt
producers' purchasing power.

Purnomo said supply leaks by OPEC over official output quotas
were helping to contain the market and that crude should fall as
northern hemisphere winter demand ebbs.

"The member countries are fully aware that they need to
stabilize prices at times like now. That's the name of the game,"
said Purnomo.

"Prices are high today but approaching spring we expect the
prices will come down and down because inventories are filling
up."

A Reuters survey of OPEC output published on Wednesday found
the cartel in December pumped nearly 1.6 million barrels per day
above its official ceiling of 24.5 million bpd in place since
November.

The OPEC president said a cut in output in February, widely
expected by oil analysts, was not a foregone conclusion.

He said it was too early to judge whether or not lower
supplies would be needed then to balance lower second-quarter
demand.

"I would say it's really too early to say. A lot of analysts
are saying that OPEC is meeting in Algiers to cut production but
I would not say that yet," Purnomo said.

He said OPEC's Vienna-based secretariat was in the process of
re-evaluating world crude supply-demand projections ahead of the
meeting in Algiers on Feb. 10.

"I think there is oversupply by March but I have asked the
secretariat to calculate the overhang."

World demand in the second quarter normally falls short of
supply but OPEC must decide whether the supply overhang is
likely.