OPEC keeps tight reign on taps
March 15, 2002 Posted: 8:14 AM EST
VIENNA, Austria - OPEC oil ministers agreed on Friday to keep a tight reign on crude oil output for at least another three months in an effort to push up prices.
The Organisation of the Petroleum Exporting Countries said it would leave production unchanged until June, when members would again meet to decide on output levels.
However, OPEC Secretary-General Ali Rodriguez said he does not expect any decision on production will be made at the next meeting because "stocks are very high and demand is very low."
The cartel OPEC wants to force the price of a barrel of crude to $25, in the middle of an old price range of between $22 and $28. It was forced to drop that target range when recession hit the world's biggest economies, United States, Japan and Germany, and prices slumped.
"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.
OPEC blamed the current inflated oil price on the threat of a U.S. attack on Iraq rather than any supply shortage. Algerian Oil Minsiter Chakib Khelil estimated that prices now included about a $3 "war premium."
Brent Crude for May delivery slipped 17 cents to $24.50 in midday Friday trading on London's International Petroleum Exchange.
OPEC's decision had been a forgone conclusion but attention is now focused on when the 10-nation group, excluding Iraq, would lift output to match demand as the global economy pulls out of a recession.
The cartel's attempt to re-establish its price range, equivalent to $24-$30 for U.S. oil, is at odds with its biggest customer, America.
U.S. Treasury Secretary Paul O'Neill told cartel kingpin Saudi Arabia last week that Washington preferred U.S. crude no higher than $25. Benchmark U.S. light crude ended 40 cents higher at $24.56 on Thursday.
OPEC analysts believe there is room for close to 1 billion barrels a day of additional supply in the second half of this year, but ministers are unlikely to talk the price down.
Brent crude hit a brief low of $16 a barrel in November but climbing as cartel and non-OPEC countries, like Russia and Norway, trimmed output.
"We hope to increase production in the third quarter," Iranian Oil Minister Bijan Zanganeh said before the meeting. "If we witness in June a good economic growth rate we can increase but now it is very soon to say anything about the level of production after June."
The U.S. and other consumer nations will hope that OPEC does not stall too long on increasing output because that could hamper an economic recovery.
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