OPEC freezes oil output, sees prices easing

OPEC freezes oil output, sees prices easing

VIENNA (Reuters): OPEC on Monday ratified an agreement on unchanged export quotas that at first sight appears to do little to soothe consumer concerns over high fuel bills this winter.

Organization of the Petroleum Exporting Countries ministers decided not to top up production quotas that already have been raised four times this year.

The producer group has reached the end of a cycle that reinstates most of the supply curbs it put in place when oil prices crashed below US$10 a barrel in 1998.

Ministers are predicting that crude, still well above $30, soon will fall into their target range of $22-$28 as the full impact of this year's 3.7 million barrels daily of supply increases is felt.

"We can only conclude that OPEC has more than fulfilled its role as a reliable oil supplier and that the true reasons for currently high prices lie behind a series of other factors," said OPEC President Ali Rodriguez of Venezuela.

Rodriguez took aim in particular at shrinking refining capacity in the United States, the world's biggest importer.

Oil dealers reacted cautiously to the OPEC decision. London Brent futures rose just three cents to $32.05 a barrel with U.S. light crude unchanged at $34.02.

The group meets again on Jan. 17 by which time oil market analysts expect a year-on-year deficit in inventories to have turned into a surplus.

"At current production levels they are already oversupplying the market for 2001 requirements," said Gary Ross of U.S. consultancy Petroleum Industry Research Associates.

"If they want to sustain oil prices they may have to take action on cutting supply in the first quarter."

OPEC effectively suspended the automatic price stability mechanism that earlier this month provided its latest increment of 500,000 bpd.

The mechanism might well have triggered more crude at the end of this month because prices remain in advance of the group's target range.

Rodriguez, who as OPEC president would order extra output under the mechanism, told reporters that no more crude was coming this year.

Saudi Oil Minister Ali al-Naimi left the door ajar for the slim possibility of extra deliveries should prices go into orbit. He said Riyadh, in control of most of OPEC's spare capacity, could act alone on supply if necessary but that more time was needed to assess the impact of earlier increases.

Many OPEC states remain more worried about a post-winter price slide than the impact of high energy costs on inflation.

"OPEC wants to avoid an uncontrollable collapse in prices and that's why it will continue to micromanage the market by meeting again in January," said Raad Alkadiri of Washington consultancy Petroleum Finance Corp.

But Saudi Arabia is unlikely to let price hawks in OPEC without spare capacity allow the cartel to get ahead of itself by slicing supplies prematurely.

Venezuela's Rodriguez emerged as a last-minute compromise to replace Rilwanu Lukman as cartel secretary-general after the failure to select from candidates put forward by Iraq, Iran, Saudi and Libya.

Venezuelan President Hugo Chavez will name a new Venezuelan oil minister in due course.

Algeria's Khelil takes over as OPEC president from January 1 and Lukman becomes alternate president.