OPEC agrees to keep pumping oil at current rates
VIENNA, Austria (AP) – OPEC members have decided to continue pumping at current levels of production despite a dramatic drop in oil prices since the terror attacks on the United States.
Representatives of the Organization of Petroleum Exporting Countries announced their decision Thursday after a final round of talks at the cartel’s headquarters in Vienna, Austria.
Confronted by shrinking demand for oil and uncertainty over U.S.-led military action against terrorism, OPEC delegates plan to reconvene on Nov. 14 to review market conditions. They said they would cut output at that time if necessary.
OPEC’s official output target is 23.2 million barrels a day. The group supplies almost 40 percent of the world’s oil, including overproduction estimated at between 700,000 and 1.5 million barrels a day.
It has cut back its official production three times this year already, most recently by 1 million barrels a day on Sept. 1.
The delegates agreed Wednesday to stick with their current production quotas but postponed announcing their decision until Thursday because they needed to wrangle over the precise wording of their official communique.
The one-day delay reflected the difficulty OPEC’s 11 member nations have had in reaching a consensus amid the intense economic and political unease prevailing since the Sept. 11 attacks on the United States.
”The deteriorating global economic outlook, exacerbated by the recent tragic events in the USA, is expected to have a dampening effect on world oil demand,” OPEC said in its communique. In order to maintain stability in oil markets, the group decided it wouldn’t change its official output.
OPEC president Chakib Khelil told a news conference that the group would use ”any measures,” including holding telephone conferences as it did when it cut output in July, to try to defend that target.
”We still have as a target to stabilize prices between $22 and $28 (a barrel),” he said.
Under an existing arrangement, OPEC has said it will cut its daily production by 500,000 barrels if its benchmark price for crude falls below $22 a barrel for 10 consecutive trading days. The OPEC benchmark price stood at $20.11 on Wednesday, the most recent day for which the information was compiled. It was the third consecutive day on which the OPEC benchmark was below $22.
Several delegates said they believed the slide in prices would be temporary.
”Prices will in the coming weeks return, I am sure, to an acceptable level,” OPEC Secretary-general Ali Rodriguez told reporters.
Still, Kuwaiti Oil Minister Adel al-Subeih said he would not be concerned if the price stayed at or even slightly below $22 a barrel. ”We would be satisfied with that,” he said.
Energy analyst Raad Alkadiri seemed to agree.
Prices ranging from $20 to $22 a barrel are ”not a nightmare” for OPEC, said Alkadiri of The Petroleum Finance Co., a Washington consultancy. ”They can still balance their budgets. This is not asking OPEC to tighten their belts too much.”
Although oil prices have plunged several dollars since the attacks, OPEC’s 11 members are constrained from cutting output to bolster prices because such a step could shove the fragile world economy decisively into recession.
OPEC’s maneuvering room is limited further by the reluctance of key members to antagonize the United States, the No. 1 importer of OPEC crude, as it leads a military alliance against Afghanistan’s Taliban regime and the forces loyal to Osama bin Laden, the prime suspect in the terror attacks.
Group members are also wary of being perceived as greedy if they try, so soon after the attacks, to push prices higher by cutting production now.
”You would be seen as trying to gain from the misfortune of others,” said Leo Drollas, chief economist of the Center for Global Energy Studies in London.
On Thursday, November contracts of North Sea Brent crude slipped 10 cents to $22.90 a barrel in trading on the International Petroleum Exchange in London. Contracts of light, sweet crude for November delivery moved higher on the New York Mercantile Exchange, up 36 cents to $22.74 a barrel.
OPEC said the group’s new president starting Jan. 1, 2002, will be Nigeria’s Rilwanu Lukman. Lukman, Nigeria’s presidential adviser on petroleum, will succeed Algeria’s Khelil.
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