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OPEC to boost oil output by 800,000 barrels a day |
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September 12, 2000
VIENNA (AP) - Despite OPEC's agreement to boost its official oil output by 3 percent, analysts said the producers' cartel is not adding enough new crude to world markets to roll fuel prices back decisively from 10-year-highs. Fuel prices dipped on commodity markets Monday in response to OPEC's decision to add 800,000 barrels to its daily production target of 25.4 million barrels. October contracts of light, sweet crude were down 41 cents at dlrs 33.22 a barrel on the New York Mercantile Exchange, after slipping as much as 93 cents in early trading. Traders on the International Petroleum Exchange in London anticipated a drop of 50 cents per barrel of North Sea Brent crude. "I think it's a normal reaction," said Kuwaiti oil minister Sheik Saud Nasser al-Sabah before resuming formal talks Monday with his OPEC counterparts. The talks ended after about two hours. The cartel's members agreed Sunday to boost output in the face of mounting international pressure to pump more crude and cool sizzling prices. Their new daily quota of 26.2 million barrels will take effect Oct. 1, and Organization of the Petroleum Exporting Countries members agreed to meet again Nov. 12 to reassess market conditions. However, analysts warned that the bulk of the increase, which was roughly in line with what many had predicted, will serve only to legitimize the 700,000 barrels that OPEC members are already estimated to be producing each day above their current quotas. As a result, the impact on prices will be meager - particularly for Americans who depend on heating oil to warm their homes, analysts said. Surging energy costs have caused concern and even outrage in many oil-importing nations. French taxi drivers and truckers blocked roads last week to protest gasoline prices, while their counterparts in Belgium and Germany and farmers in Britain have mounted similar, if smaller, efforts to disrupt traffic. Americans living in areas where there is heavy snowfall worry that low inventories will lead to soaring prices for heating oil this winter. OPEC oil ministers reached their decision in informal talks in Vienna. A formal meeting to ratify the increase continued Monday. "This is our best assessment of what the market needs now," Saudi Arabian oil minister Ali Naimi said. "It will improve and moderate the price, and if it doesn't we have a mechanism to trigger some more." Saudi Arabia, OPEC's largest producer and exporter, led the push for an increase. In Washington, the U.S. government gave Saudi Arabia credit for the OPEC move but said it is too early to know what effect it will have on the shortage in world oil inventories. "Whether such an increase will stabilize the market remains to be seen," Energy Secretary Bill Richardson said. "Nonetheless, this expected production increase will bring needed additional oil into world markets." Leo Drollas of the London-based Center for Global Energy Studies said the increase was the bare minimum necessary to gradually replenish U.S. inventories of crude. But while prices for crude may start to stabilize and even fall, heating oil prices are likely to stay high, he said. "This agreement is doing nothing for U.S. consumers, nor could it have been expected to given the tightness in the home heating oil market in the U.S. and the refineries' lack of capacity," he said. Refineries are working almost flat out to produce heating oil already, and it will take at least 45 days before any new barrels of crude can reach consumers in the form of heating oil. "Just pray for a warm winter," he said. Bill Edwards, a Houston-based consultant, argued that OPEC lacked the determination to pump enough new crude to trigger a sharp drop in prices. A price of dlrs 40 a barrel is "around the corner," he said, enough to make some Americans consider chopping wood for fuel. However, OPEC's decision to meet again in November to re-examine market conditions might help persuade markets that the group is serious about reining in prices, said energy consultant Falah Aljibury of Alamo, California. Aljibury said he expected crude prices to ease by at least dlrs 2 a barrel due to OPEC's planned increase. "It's not a lost cause for consumers," he added. Some leaders of OPEC countries deny an oil shortage is to blame for high prices. The news of the output increase came after the completion of the Asia-Pacific Economic Cooperation forum in Brunei, where officials issued a statement earlier Sunday urging OPEC members to stabilize oil prices. Paul Jeremias, deputy secretary of the Philippine finance ministry, welcomed the decision. "It will be much better to have lower oil prices because there will be less impact on the poor," he said in Brunei. OPEC president Ali Rodriguez blamed much of the recent run-up in prices on consuming countries, where many governments levy heavy taxes on fuel. Speculators, too, have contributed to the price rise, he said. Iranian oil minister Bijan Namdar Zangeneh agreed, saying, "This is the opportunity and the time for the consuming countries to act for the benefit of their consumers." Crude prices fell Friday in anticipation of an increase by OPEC, which produces about a third of the world's oil. Futures contracts dropped dlrs 1.76 to dlrs 33.63 a barrel on the New York Mercantile Exchange, putting an end to a surge that had seen prices jump 30 percent since Aug. 1. In London on the International Petroleum Exchange, October Brent crude from the North Sea fell dlrs 1.77 to dlrs 32.78 a barrel. |
