Monday June 19 4:52
PM ET
OPEC Set to Lift Output AgainBy Richard Mably VIENNA, Austria (Reuters) - OPEC bids this week to pull off a tricky balancing act by raising oil output enough to satisfy demands in the West for lower fuel costs without sending crude prices crashing. Leading members of the Organization of the Petroleum Exporting Countries, including Saudi Arabia and Iran, believe oil now near $30 a barrel is damagingly high. Riyadh now favors extra output of near one million barrels daily on top of the 24.7 million bpd assigned to 10 OPEC members.
OPEC delegates said late on Monday that leading producers now had a precise figure in mind that would fall short of a million barrels daily. ``It's not a million but it's closer to a million than 500,000 bpd,'' said one senior OPEC delegate. Oil prices have remained stubbornly strong despite the seven percent increase in output sanctioned by OPEC last March after heavy pressure from its biggest customer, the United States. ``Saudi Arabia and the United States share the same goal -- they both want oil prices back down to $25 a barrel,'' said Roger Diwan of Washington's Petroleum Finance Corp. Outside the cartel, Mexico and Norway also are expected to announce additional supplies, amounting to a few hundred thousand barrels a day. The prospect of more oil to come has been enough to push crude prices sharply lower. U.S. light crude fell 64 cents a barrel to $31.69. Keeping Washington Content OPEC's task this week is not simple. Timely oil market data is notoriously unreliable and prone to hefty revisions. While worldwide crude inventories remain low, industry data shows stocks are building quickly. Most dealers agree that crude prices would be lower were it not for new environmental rules this summer in the United States that have restricted the pool of American gasoline supply. ``There is no problem of supply,'' said OPEC President Ali Rodriguez on Monday. ``There is an intense problem of speculation especially in the United States because of the gasoline problem.'' ``The Saudis are going to want to lift production because of their political concerns with the U.S.,'' said Gary Ross of U.S. consultancy Petroleum Industry Research Associates. ``But they have a legitimate concern that there is already plenty of crude available and that it is tightness in the U.S. gasoline market which is in part to blame for taking crude so high.'' The International Energy Agency in Paris estimates oil stocks in the 77 million barrels daily world market will rise swiftly by 2.2 million during the second quarter. But OPEC also is worried that evidence is starting to mount that expensive oil has stunted demand growth among consumer nations. The IEA has twice in recent weeks downgraded its projection for world oil demand in 2000, citing the impact of lofty prices on consumption. IRAN BACK IN THE FOLD? OPEC is hoping to bring Iran back into the fold this time by securing Tehran's part in a new agreement. Hojatollah Ghanimifard of the National Iranian Oil Company said on Saturday that Iran too thought prices should be lower and that his country would take its share of any increase in cartel production. ``The current increase in oil prices was beyond expectations. Nobody expected such an increase,'' said Ghanimifard. ``The main risk is that a substitute for oil may be found.'' Tehran in March opted out of the OPEC deal, complaining about interference in OPEC affairs from the United States, but upped output anyway. OPEC must take some of the blame for prices which at their high point last week rose over $33 in the United States. The cartel aggravated the market by deciding not to implement a mechanism, informally agreed in March, that was supposed to trigger 500,000 bpd of extra output when prices rose above $28 for a basket of its crudes. Ministers now will have to wrestle again with an idea which has been criticized by some in the industry for increasing price volatility by attracting speculative trading to test OPEC's designated $22-$28 a barrel price band. If they keep the mechanism, traders will be hoping that this time OPEC decides to write down the details of how it works. |
Speak your mind-- cpr (buytexas@swbell.net), June 19, 2000