OPEC may opt to discuss higher output next week

But analysts say cartel already overproducing, so can't ease oil prices

May 13, 2004|By AGENCE FRANCE-PRESSE

VIENNA, Austria - OPEC oil ministers may hold an informal meeting in Amsterdam next week to discuss the possibility of raising the cartel's production ceiling as world oil prices are skyrocketing, OPEC's president said yesterday in a press release.

Indonesian Oil Minister Purnomo Yusgiantoro, president and secretary general of the Organization of the Petroleum Exporting Countries, said the ministers would take advantage of their presence at an International Energy Forum meeting in the Netherlands "to review the world oil market situation."

Saudi Arabian Oil Minister Ali al-Naimi had said Tuesday that the 11 OPEC ministers would discuss the market situation May 21 and "reach an understanding to increase the production ceiling during the extraordinary OPEC meeting to be held in Beirut," on June 3.

But analysts said OPEC already is overproducing crude oil and can do little to affect prices, which soared to new 13 1/2 -year highs in London yesterday. The price of benchmark Brent North Sea crude oil for June delivery rose 44 cents to $37.80 in late trading.

In New York, the benchmark contract for light sweet crude for delivery in June leaped 71 cents to finish at $40.77 a barrel, shattering the previous closing high of $40.42, reached Oct. 11, 1990.

The London and New York prices were the highest levels reached since Iraq rolled into Kuwait, setting off the 1991 gulf war.

OPEC, which produces about one-third of the world's crude oil, had cut output April 1 by 1 million barrels per day to reduce total daily production of 23.5 million barrels in a move to prop up prices with demand expected to fall in spring in the northern hemisphere.

But prices have gone straight up since then.

Yusgiantoro said that although OPEC had cut its official production, the 10 OPEC nations in the quota system, in which Iraq is not counted, have "recently been producing over 2 million barrels per day in excess of that ceiling."

"We have not discouraged our members from producing more because we want to do everything we can to stabilize prices," he said.

Investec analyst Bruce Evers said in London that such overproduction by OPEC should already have pushed down prices.

"But it did not happen because of extreme tensions in the Middle East and other producing countries ... and because demand is much stronger than people think," Evers noted.

He said the United States was putting pressure on Saudi Arabia, the world's largest oil producer, to "take the heat out of the oil price because high oil prices obviously affect the global economy after a period of time.

"High oil prices also mean high gasoline prices, which is a politically sensitive issue," especially during a presidential election year in the United States, Evers said.

Yusgiantoro said OPEC will do "whatever it deems necessary to calm the market," according to the news service report.

He said, however, that there is plenty of oil on the market and that high prices were "closely linked to geopolitical uncertainties, inadequate refining capacity in the United States to cope with rising demand, multiple specifications for gasoline by different [U.S.] states and heavy speculation on oil by investment funds."

"All of these are factors about which OPEC has no control," Yusgiantoro said.

Kuwait's oil minister, Sheikh Ahmed Fahd al-Sabah, said yesterday that his country would back any output increase by OPEC members to harness soaring oil prices and stabilize the market.

Worries about terrorist attacks have risen since gunmen attacked a Saudi oil facility at Yanbu port May 1, killing five staff of the Swiss engineering group ABB and a Saudi national guard.

Meanwhile, booming economic growth around the world is spurring demand for oil at the fastest rate in 16 years, the International Energy Agency said in Paris, calling on suppliers to pump more crude.

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