OPEC restrains oil exports again
OPEC restrains oil exports again
VIENNA (Reuters): OPEC producers agreed on Friday to restrain oil exports for the second time this year, slicing about one million barrels a day -- near the upper end of expectations.
The Organization of the Petroleum Exporting Countries is hoping the cutbacks will restore prices for its oil to US$25 a barrel, equivalent to about $27 for international benchmark Brent.
Ministers said mounting concerns about failing petroleum demand because of a downturn in world economic growth had convinced them to take tough action on supply.
"The context of this decision is uncertainty about the world economy this year, above all about the north American economy and its impact in Asia which we expected to be the main growth area," said OPEC Secretary-General Ali Rodriguez.
Saudi Oil Minister Ali al-Naimi said a formal announcement confirming the exact size of the cutbacks would be made on Saturday.
A million barrel-a-day reduction shaves limits for 10 OPEC members, excluding sanctions-bound Iraq, by four percent to 24.2 million bpd.
Analysts said the magnitude of new curbs would put the heat back under oil prices, off sharply from last year's 10-year highs.
"A million barrel a day cut by OPEC is bullish because crude stocks will decline substantially in the second quarter," said consultant Gary Ross of PIRA Energy.
"But I can't imagine how there will be enough oil for the second half when demand picks up again so prices inevitably will move up sharply at some point to signal that OPEC should raise quotas again."
London Brent blend gained 79 cents to $25.80 a barrel and U.S. light crude added 73 cents to $27.28 as dealers reacted to news of the deal.
Prices had slumped earlier this week, knocking OPEC's reference basket of crudes down to $22.77, the bottom end of its preferred $22-$28 target.
Iranian Oil Minister Bijan Zanganeh said non-OPEC suppliers Mexico, Angola and Oman would help support oil prices with export restraints of their own. There was no immediate confirmation from those countries, in attendance as observers.
Small OPEC producers like Algeria and Indonesia had pressed for an even more aggressive cut.
Moderate members, though, mindful not to choke off demand by hurting economic growth among importing nations, were worried about pushing prices too high.
"Economic growth in the short term is driven by consuemr confidence and OPEC aims to reinforce this confidence by ensuring stable prices," said OPEC President Chakib Khelil.
OPEC already had curtailed supplies by 1.5 million bpd in January to counter a downturn in demand at the end of the northern hemisphere winter.
The European Commission, representing some of OPEC's major customers, called the cartel's efforts ill-timed given the signs of slowdown in economic growth.
Oil importers fear a repeat of last year when the crude price spike sent energy bills rocketing, fueling inflation.
Growing export levels from Iraq, outside OPEC's quota system under United Nations sanctions, are expected to dampen the impact of cartel restraints.
Baghdad says it is planning to lift exports under a U.N. humanitarian program towards two million bpd this month from 1.3 million in February. It also has been smuggling increased volumes, in particular to Syria through a recently refurbished pipeline.