DUBAI, United Arab Emirates -- Oil producers may decide to increase output when they meet in March, an OPEC delegate said yesterday, signaling a possible retreat from restraints that caused prices to double last year.
"All options are open" when the Organization of the Petroleum Exporting Countries meets in March, a United Arab Emirates OPEC delegate said. The remark is a departure from members' previous statements. Oil ministers from Saudi Arabia and Kuwait said last month that output cuts beyond March had OPEC support.
Since then, oil producers in and outside the group have signaled a weakening resolve to maintain their quotas. Last week, Saudi Arabia and Norway indicated that a world oil glut had ended. "OPEC will likely increase output, even though it's hard to say by how much," said Tony Alves, oil analyst at Investec Henderson Crosthwaithe Ltd.
Brent crude oil for March settlement fell as much as 42 cents, or 1.6 percent, before rebounding and was up 32 cents at $26 a barrel on the International Petroleum Exchange. Crude oil for March delivery on the New York Mercantile Exchange was 51 cents higher at $27.73 a barrel.
OPEC is undecided on whether to extend its output cuts beyond March, the Middle East Economic Survey newsletter said yesterday, with members wanting to study price developments and inventories when they meet. While many nations want to keep the plan, conflicts exist over whether extensions should last three, six or nine months, the publication said.
A separate OPEC delegate confirmed that a final decision would not be made until the March meeting.
By keeping the output restraints, OPEC could send prices higher and encourage competitors to produce more oil, possibly cutting the group's market share. Also, higher oil prices are contributing to inflation in Europe and the United States.
Oil executives say rising demand and a lack of new investment in the industry in the past two years will help bolster crude prices, allowing OPEC to boost production.
"You don't have to be a genius to see oil prices will stay high for the rest of the year," somewhere around $20 a barrel on average, Mark Moody-Stuart, chairman of the Royal Dutch/Shell Group, the world's second-largest publicly traded oil company, said at the World Economic Forum in Davos, Switzerland.
Rising economic growth worldwide should also give OPEC room to open the taps, analysts said. Consumers will burn an average 77.3 million barrels a day this year, up 2.4 percent from 75.5 million a day in 1999, the Paris-based International Energy Agency said.
OPEC, along with Norway, Mexico, Oman and Russia, agreed in March to cut global oil supply by 7 percent for one year to deplete oil inventories and boost prices that had dropped below $10 a barrel in December 1998 to a 12-year low. By the time OPEC ministers meet March 27, oil inventories will have plunged, analysts forecast. Oil use will outpace production by 2 million to 3 million barrels a day in the first three months of this year if producers continue to restrain supply, the IEA said.
The oil exporters group, whose revenue soared about 40 percent to $160 billion last year, has succeeded in achieving its two main objectives of boosting oil prices into the $18 to $20 range for a barrel of Brent crude and reducing global oil stocks to 1996-1997 levels.
Brent crude oil during the past year has averaged $19.13 a barrel. And crude oil inventories in the United States are at the lowest since 1997, according to American Petroleum Institute estimates.