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Transparent oil prices made opaque at OPEC meet |
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June 22, 2000
VIENNA, (AP) - OPEC oil ministers held informal discussions Wednesday to move closer to an agreement to boost daily crude production by at least half a million barrels above their quota set in March, but markets judged this too marginal and crude prices soared to a 3 1/2-month high on U.S. markets.
Ministers from the Organization of Petroleum Exporting Countries hoped to reach a formal decision Wednesday in Vienna.
An increase of 500,000 barrels daily would not significantly add to the flow of crude to the market because it would equal roughly the amount of crude that OPEC's 11 members are already pumping in excess of their official quotas.
Analysts said that such a hike - the equivalent of 2 percent of OPEC's declared output - would do little to dampen current high prices for crude and gasoline.
July contracts for West Texas Intermediate, the U.S. benchmark crude, shot up dlrs 1.36 a barrel Tuesday to close at dlrs 33.05 after trading as high as dlrs 33.40 on the New York Mercantile Exchange. The last time prices were higher was March 8.
Contracts for August delivery of North Sea Brent crude rose dlrs 1.04 Tuesday to dlrs 29.02 a barrel on the International Petroleum Exchange in London.
Saudi Arabia and Iran, OPEC's two largest producers, cleared a potential hurdle to a consensus by forging what Iranian oil minister Bijan Namdar Zangeneh described as a "common position" on whether and by how much to boost the group's output.
Zangeneh refused to elaborate, but he told reporters that Iran would participate in a production increase if other OPEC members agree on one.
"We won't lose our market share," he said. Obaid bin Saif Al-Nasseri, the United Arab Emirates oil minister, said OPEC members have agreed to raise production and were haggling over the size of that increase.
The ministers are meeting at a time when pressure is building in the United States for relief from sharply rising gasoline prices.
The national average price of regular unleaded gas was dlrs 1.681 this week, up from dlrs 1.631 a week ago and dlrs 1.42 on May 1, according to the U.S. Department of Energy.
OPEC ministers refused to indicate the size of any production increase, but some OPEC sources estimated the amount under discussion could be as large as 1 million barrels a day.
An increase of 1 million barrels could reduce prices for U.S. crude to dlrs 27-dlrs 28 per barrel, said Roger Diwan, an analyst at The Petroleum Finance Company, a consultancy based in Washington.
Another analyst, Leo Drollas, the chief economist of the Center for Global Energy Studies in London, noted that only Saudi Arabia, Kuwait and the United Arab Emirates have much spare capacity to pump new oil, "The problem is that some of these countries won't be able to meet a target of 1 million barrels ... at the moment," he said.
"But take two or three months and they will." OPEC pumps about 35 percent of the world's oil. Key non-OPEC producers such as Mexico have cooperated with the cartel, agreeing in March, for example, to boost their output in line with OPEC.
Under
pressure from the United States, nine OPEC members agreed in
March to raise output in a successful effort to trim crude prices, which
had almost tripled over the previous year.
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