OPEC may extend output ceiling
OPEC may extend output ceiling
ABU DHABI (AFP): OPEC oil ministers meeting in Indonesia this month will likely extend the cartel's official production ceiling to support sagging oil prices, the official Emirates news agency said yesterday.
It said the rollover of the 24.52 million barrel per day (bpd) ceiling, in force for nearly 13 months, would push up prices by more than US$2 because of high seasonal demand in the first quarter of 1995.
"Contacts among members of the Organization of Petroleum Exporting Countries as well as market factors have produced indications that the oil ministers will take a decision to extend the current output ceiling," it said.
"Their only mission will be whether to fix that ceiling for the first quarter of 1995 or the first half."
OPEC's 12 oil ministers will meet in the Indonesian island of Bali on Nov. 21 to set fresh production levels and elect a new secretary general after the three-year term of Subroto of Indonesia expired in June.
The present ceiling has been in force since September 1993 but oil prices have remained far below OPEC's target of US$21. In March, they dipped to $13 before they recovered to around $16.
Nigerian minister of state for petroleum and mineral resources, Alhaji Umaru Baba, said during a Gulf tour this week that crude prices could rise by $2 a barrel if OPEC extended the ceiling and complied with production.
Independent estimates showed the organization was producing around 300,000-400,000 bpd above its ceiling. But the figure is dwarfed by massive quota violations in the past few years.
Low oil prices have hurt Gulf states most as they depend heavily on crude exports. Saudi Arabia, the world's top oil producer and exporter, and other Gulf oil heavyweights were forced to slash spending in the past two years to cut budget deficits, leading to a slowdown in their economies.
"The decision to extend the production ceiling will boost oil prices by $2 or more and at the same time it shows that OPEC has entered a new stage of chalking out policies that serve the interests of all," WAM said.
"This is a significant step by OPEC towards realizing its objectives for reaching a price of $21. According to several OPEC ministers, the Bali conference is expected to be easy as it will be a continuation of the organization's new policy."