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.