OPEC keeps cap on oil output to fuel price rise
OPEC keeps cap on oil output to fuel price rise
Peg Mackey and Richard Mably, Reuters, Vienna
OPEC agreed on Friday to keep a cap on oil output for three months, leaving consumer nations to fret that crude might race out of control before the cartel eases open the taps.
The Organisation of the Petroleum Exporting Countries is seeking to cement the price of its export basket in a US$22-$28 a barrel range and wait for a global economic revival to lift demand for its oil.
"The price has only just entered the lower end of our band and we hope it moves higher as the economy recovers," said Venezuelan Oil Minister Alvaro Silva.
Oil prices have risen sharply in recent weeks after a fourth quarter slump, spurred higher by signs of an economic upturn and fears that the United States might target OPEC member Iraq for military action.
OPEC, planning to meet again in mid-June, is sending mixed signals about policy intentions for the second half of the year.
"OPEC has to strike a delicate balance between providing a growing world economy with sufficient oil without force feeding it and risking weaker prices," said Gary Ross of New York consultancy PIRA Energy.
"But history shows that it tends to fall behind the curve, undersupplying the market during periods of rising economic activity and growing demand. And that forces prices up."
Cartel price hawks say they see no reason to raise output until prices reach $28 for their basket, equivalent to at least $30 for benchmark U.S. light crude.
That is $5 above the $18-$25 comfort zone signaled last week to OPEC power Saudi Arabia by U.S. Treasury Secretary Paul O'Neill. U.S. light crude eased 15 cents in early electronic trade on Friday to $24.41 a barrel.
"My hunch is that we will not see enough economic growth such that we will need to increase production in June," said Algeria's Oil Minister Chakib Khelil
"We have a range of $22-$28, so why should we raise if it is not above $28?" added OPEC President Rilwanu Lukman.
But OPEC's biggest and most influential producers may be preparing to step in and stop prices spiraling out of control and hurting an economic rebound.
Saudi Oil Minister Ali al-Naimi said OPEC could lift output if inventories started to drain while his Iranian counterpart Bijan Zanganeh said he hoped economic growth would prove sufficient to allow extra output in the third quarter.
"We are looking at satisfactory international stock levels. When we see that they start to decline we might take a decision to increase production," Naimi told Arabic newspaper Al-Hayat.
"My impression is that both the Iranians and the Saudis are inclined towards raising output some time during the second half of the year," said a senior delegate from another Gulf country.
"If they don't want a repeat of 2000 when prices ran out of control they will have to increase in the third quarter by at least another million barrels a day," said Roger Diwan of Washington consultancy Petroleum Finance Corp.
OPEC restrictions limit 10 member nations to 21.7 million barrels daily, leaving more than five million barrels a day (bpd) of idle capacity on the 75 million bpd world market.
That leaves plenty of cover for any loss of output from OPEC member Iraq if Washington widens its war on terror to take military action against Baghdad.
Iraq pumps some 2.5 million barrels daily in an exchange for humanitarian goods monitored by the United Nations, still enforcing sanctions imposed after Baghdad's 1990 invasion of Kuwait.
OPEC has persuaded independent producers that joined its supply management campaign last December to stay on board for another three months. Ministers are confident Russia will match Mexico, Norway and Oman in agreeing to keep a lid on output.