OPEC: No Increase in Oil Production
V I E N N A, Austria, Nov. 13, 2000 -- OPEC ratified anagreement today on unchanged supply that will provide cold comfortfor consumers fretting over high fuel bills this winter.
Organization of the Petroleum Exporting Countries ministersdecided not to adjust crude production quotas that already havebeen raised four times this year.
Hoping for the Target PriceThe producer group has reached the end of a cycle thatreinstates most of the supply curbs it put in place when oilprices crashed below $10 a barrel in 1998.
Ministers are predicting that crude oil, still well above$30, soon will fall into their target range of $22-$28 as thefull impact of this year’s 3.7 million barrels daily of supplyincreases is felt.
“We can only conclude that OPEC has more than fulfilled itsrole as a reliable oil supplier and that the true reasons forcurrently high prices lie behind a series of other factors,”said OPEC President Ali Rodriguez of Venezuela.
Rodriguez took aim in particular at shrinking refiningcapacity in the United States, the world’s biggest importer.
“The feeling we have now is that the market is gettingperhaps a little a saturated and as stocks build up it islikely to hit us in the face later in the New Year if we don’twatch it,” said cartel secretary-general Rilwanu Lukman.
“We do not want to overdo it and put the market in a stateof jeopardy.”
Inventories on the MendOil prices rose cautiously after the OPEC decision. LondonBrent futures were 28 cents up at $32.30 a barrel with U.S.light crude up 30 cents in early trade at $34.32.
The group meets again on Jan. 17 by which time oil marketanalysts expect a year-on-year deficit in inventories to haveturned into a surplus.
“At current production levels they are alreadyoversupplying the market for 2001 requirements,” said Gary Rossof U.S. consultancy Petroleum Industry Research Associates.”
“If they want to sustain oil prices they may have to takeaction on cutting supply in the first quarter.”
OPEC effectively suspended the supposedly automatic pricestability mechanism that earlier this month provided its latestincrement of 500,000 barrels per day.
The mechanism might well have triggered more crude at theend of this month because prices remain in advance of thegroup’s target range.
Impact on Home Heating BillsRodriguez, who as OPEC president would order extra outputunder the mechanism, told reporters that no more crude wascoming this year.
Saudi Oil Minister Ali al-Naimi left the door ajar for theslim possibility of extra deliveries should prices go intoorbit. He said Riyadh, in control of most of OPEC’s sparecapacity, could act alone on supply if necessary but that moretime was needed to assess the impact of earlier increases.
Many OPEC states remain more worried about a post-winterprice slide than the impact of high energy costs on inflation.
“OPEC wants to avoid an uncontrollable collapse in pricesand that’s why it will continue to micromanage the market bymeeting again in January,” said Raad Alkadiri of Washingtonconsultancy Petroleum Finance Corp.
But Saudi Arabia is unlikely to let price hawks in OPECwithout spare capacity allow the cartel to get ahead of itselfby slicing supplies prematurely.
Venezuela’s Rodriguez emerged as a last-minute compromiseto replace Rilwanu Lukman as cartel secretary-general after thefailure to select from candidates put forward by Iraq, Iran,Saudi and Libya.