OPEC determined to cut oil output
Fitri Wulandari, The Jakarta Post, Jakarta
The Organization of Petroleum Exporting Countries (OPEC) will not change its plan of cutting crude oil output on April 1, despite the rising price of oil.
"We will stick to our February decision (to slash the output). But we are reviewing how long the price has been above US$28 (per barrel)," OPEC president Purnomo Yusgiantoro, who is also Indonesia's Minister of Energy and Mineral Resources, said on Monday.
Purnomo said the current high price for oil was not caused by "fundamental" factors, such as the imbalance of supply and demand, but non-fundamental ones, such as speculation by traders and concerns over unrest in Venezuela.
OPEC is to meet again at the end of March in Vienna.
OPEC, which produces a third of the world's oil, decided on Feb. 10 to reduce official output limits by one million barrels per day (bpd), from 24.5 million bpd to 23.5 million bpd on April 1. This was an attempt to prevent the price from falling when oil demand is expected to falter in the second quarter of the year as the European winter comes to an end.
However, oil prices have been climbing since February.
OPEC's basket price on March 4 was US$32.05 per barrel. OPEC's basket price is an index of seven oil grades namely Saharan Blend (Algeria), Minas (Indonesia), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Dubai (United Arab Emirates), Tia Juana Light (Venezuela) and Isthmus (Mexico).
OPEC had said it would keep its basket price in the US$22-$28 range. If the price of oil stayed above US$28 per barrel for 20 consecutive trading days, it would raise production by 50,000 barrels a day. If the price stayed below $22 for 10 consecutive trading days, it would cut output by a similar amount.
In London, oil prices held at post-Iraq war highs on Monday as low U.S. gasoline inventories and unrest in OPEC member Venezuela heightened fears over supplies for the U.S. summer driving demand, according to Reuters.
London Brent crude was down five cents at $33.30 a barrel, within 30 cents of Friday's new 12-month peak, which was the highest level since just before last year's U.S.-led invasion of Iraq. U.S. light crude was down nine cents at $37.17 a barrel.
Low stocks of crude and gasoline in the United States have raised fears of a supply crunch in the summer holiday season, when demand for motor fuel peaks.
Violent street protests by foes of President Hugo Chavez who are demanding a referendum on his rule have raised fears of a possible repeat of a two-month oil strike at PDVSA last year that briefly shut most of Venezuela's oil production. Venezuela is the world's fifth-largest oil exporter and a major supplier to the United States.
"With U.S. stocks already so tight, the mere possibility of a repeat of the strikes in Venezuela that paralyzed the oil industry has the attention of even the most complacent market watcher," said Washington-based analysts PFC Energy.
State oil company Petroleos de Venezuela (PDVSA), which spearheaded last year's strike, is less likely to be at the forefront this time, analysts said.
"Chavez effectively purged PDVSA, leaving his supporters firmly in control, and the opposition remains too fragmented to effectively stage a repeat of the work stoppages seen during the last strike," the PFC report said.
The International Energy Agency (IEA), which advises 26 nations on energy policy and security, criticized OPEC on Monday, saying markets should be left to decide price and stock levels and that the current rally was hurting developing countries.
"We are a little perplexed by the idea of a cut on April 1 as it really won't take effect in the market until some time in May or June, and we are going into the driving season when refineries are running flat out to meet gasoline demand," said William Ramsay, IEA deputy executive director.