OPEC meeting changes little

October 29, 2001 Posted: 2000 GMT

VIENNA (CNNmoney) -- Oil prices held steady Monday after OPEC producers failed to make much headway in persuading non-OPEC exporters to cut production in an effort to help stem an oil price slump. 

"We managed to develop a common picture of the market situation," said Adnan Shihab-Eldin, head of the Organization of Petroleum

Exporting Countries research department. "This was not a meeting to discuss action. Action will be discussed at a different level."

Represented at the talks along with OPEC's 11 members were Mexico, Russia, Norway, Kazakhstan, Angola and Egypt.

OPEC is hoping a cut of about one million barrels per day in its own output will remove excess supply from world markets and force its export prices back to a targeted $25 a barrel from below $19 last week.

Prices held steady at close to $22 Monday.

But it wants to ensure that non-OPEC countries do not undermine its measures with more exports and has asked those countries to at least freeze supply.

It is an uphill task for OPEC, which controls two-thirds of world exports, because few outside the cartel see their interest served by restricting output.

Cartel ministers will make a final decision at a meeting in Vienna Nov. 14.

Oil prices have plummeted by a quarter since last month's suicide air attacks on the United States, which darkened an already gloomy outlook for the world economy.

Venezuela, Iraq, Qatar and Indonesia all have said they back an OPEC output cut of a million barrels per day (bpd) if non-OPEC nations agree to freeze output at current levels.

"Oman has expressed its readiness to cut production and to cooperate with the rest of the producing countries from OPEC and non-OPEC in order to maintain the price band target," a joint statement by ministers from the three countries Saturday said.

But Mexican President Vicente Fox dampened OPEC's early hopes of an easy agreement when he said state oil company Petroleos Mexicanos would not cut or freeze output levels for now.

"There will not be a reduction in Pemex production for now," Fox told reporters Sunday after meeting President Hugo Chavez of Venezuela, an OPEC member.

The discussions with non-OPEC countries are complicated by the fact that OPEC itself is not complying with its self-imposed production ceiling, according to independent monitors who track exports.

In October, preliminary estimates show the cartel pumped roughly 3.7 percent, or 850,000 bpd, above its 23.2 million bpd ceiling for 10 members, excluding sanctions-bound Iraq.

OPEC analysts estimate the 76 million bpd market is now about 1.0-1.5 million bpd oversupplied because demand growth evaporated after last month's attacks.

But Mexico, which for two years has helped OPEC engineer a price boom with export curbs, is not the only reluctant partner now.

Russia, the world's number two oil exporter, has become OPEC's top priority since it hiked output sharply over the past year, but it also ruled out cuts last week.

Russian officials said Moscow would coordinate oil policy and sales with OPEC, but a cut in Russian output was not under discussion at the moment.

Norway, the world's third-biggest exporter after Saudi Arabia and Russia, has said it will not restrict its 3.1 million bpd of production, which is budgeted to rise to 3.2 million next year.

"Production regulation is not on my agenda," Norwegian Oil Minister Einar Steensnaes said last week.

Earlier, OPEC cartel-members Saudi Arabia and the United Arab Emirates agreed to cut output.

Saudi Arabian Oil Minister Ali al-Naimi said the size of the cut depends on the outcome of a meeting between OPEC and non-OPEC technical experts in Vienna Monday.

Tiny Oman Saturday became the first non-OPEC country to agree in principle to cut after meeting Naimi and the United Arab Emirates.

Brent crude futures for December delivery rose 30 cents to $21.32 in mid-morning trade on London's International Petroleum Exchange. OPEC's basket price has languished below $22 for over three weeks.

Venezuelan President Hugo Chavez, who has been seeking commitments from Mexico, Canada and Russia, has said that OPEC may cut supply by as much as 1 million barrels a day.

"Whether OPEC chooses to make public the size of any output cut ahead of the ministerial meeting Nov. 14 is uncertain," GNI oil analyst Lawrence Eagles wrote in a note to investors. "But it may well choose to do so if prices remain weak."