Oil cartel threatens to cut output if prices drop below $22 per barrelgreenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
09:57 AEDT Sunday 5 November 2000
Oil cartel threatens to cut output if prices drop
The Organisation of Petroleum Exporting Countries (OPEC) will not hesitate to cut production by as much as necessary if crude oil prices drop below $US22 per barrel, according to Rilwanu Lukman, secretary-general of the cartel.
"If the prices fall below $US22 per barrel next year, there would be no magic involved and we will cut production," Lukman said at a press conference on the sidelines of an energy conference that opened Saturday in Tehran.
OPEC's price-band mechanism calls for adjusting supply by increasing output by 500,000 barrels a day if the OPEC basket price stays above $US28 a barrel for 20 working days. It also calls for cutting production by the same amount if the price drops below $US22 per barrel for 10 working days.
Lukman said the current oil market prices are artificially high because of tension in the Middle East and a shortage of some products in the US market. These factors are temporary, he said, and the prices likely will fall after the winter season.
Lukman also said he believes that at least a couple of dollars added to crude oil prices is attributable to US internal politics because of the upcoming presidential election.
"We have to wait until after the US presidential elections to find out if this (current oil price level) is true or not."
Lukman said that despite talk about OPEC's production capacity restraints, the group still has some excess capacity to use if and when necessary.
Experts believe Saudi Arabia holds virtually all of the group's spare oil output capacity. Saudi Arabia has a total production capacity of 10.5 million barrels a day, and had a September output of 8.8 million barrels per day.
Lukman said OPEC is interested in stable market conditions with fair prices, but he said that was not possible without cooperation from oil-consuming countries.
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