OPEC to keep oil output stable, meet again in July
VIENNA, Austria (AP) – OPEC members formally agreed Tuesday to keep pumping oil at their current levels and to meet again in July to assess the impact of Iraq’s suspension of its crude exports.
Delegates from the Organization of Petroleum Exporting Countries announced the decision after a formal session at the cartel’s headquarters in Vienna. They said the decision was unanimous.
By meeting again next month, OPEC is taking a highly unusual step that indicates the seriousness with which it views Iraq’s action. Ministers said the group will meet July 3 to review market conditions, in the wake of Iraq’s halt on Monday of its 2.1 million barrels in daily oil exports.
”We decided to meet in July because we wanted to see what the reaction of the market would be,” said Qatar’s oil minister, Abdullah bin Hamad Al Attiyah. When asked if OPEC would pump more oil at that time if conditions warrant, he replied: ”We will.”
OPEC has an official output target of 24.2 million barrels a day, and its members pump about two-fifths of the world’s crude. Although Iraq belongs to OPEC, it doesn’t participate in production agreements with the group’s other 10 members.
Iraq’s move complicated what had been shaping up to be a straightforward decision by OPEC to keep pumping at current levels. Demand for oil historically increases in June, and Saudi Arabia is the only OPEC member able to quickly make up much of the loss of Iraq’s oil.
Saudi Arabian Oil Minister Ali Naimi told reporters supply and demand for oil are ”very well balanced” at present and that the ministers saw no need to boost output now. There was no way of knowing the duration of Iraq’s export suspension, he said, adding: ”There have been erratic (Iraqi) decisions before.”
Iraq has suspended exports in the past, and its shipments have been somewhat inconsistent since December.
Naimi said Iraq’s current halt in exports was ”just one factor” in OPEC’s decision to meet again next month.
”This is the time when other factors can also affect supply,” such as hurricanes and extreme heat, he said. ”I think it’s very prudent for us to meet in July to really assess the situation in the third quarter and the fourth quarter.”
Crude prices initially shot higher Monday on Iraq’s announcement, then fell as it became apparent that OPEC was unlikely to allow a shortfall to occur.
Iraqi Deputy Oil Minister Taha Humud Musa helped calm the markets, telling reporters his government has suspended exports for one month. The halt was intended to protest the U.N. Security Council’s decision to extend by one month instead of the usual six months the program under which Iraq can sell oil.
Non-OPEC member Russia said Tuesday it would not boost oil exports in response to Iraq’s cut, saying OPEC could pick up the slack.
In a speech at the start of the formal meeting, OPEC president Chakib Khelil told fellow delegates that OPEC is ”ever-mindful of the need to ensure that stable, low-cost supplies of crude will continue to contribute positively to sound economic growth in consuming countries.”
In trading Tuesday, July contracts of North Sea Brent crude were up 16 cents to $29.28 on the International Petroleum Exchange in London. On the New York Mercantile Exchange, contracts of light sweet crude for July delivery were off 11 cents at $28.20.
The cartel’s members are meeting as motorists in the United States are paying stiff prices at the pump, with some shelling out more than $2 a gallon for gasoline. OPEC says transportation problems and bottlenecks at U.S. refineries are the cause of the high prices.
”It is noteworthy that senior U.S. officials have absolved OPEC of responsibility for high product prices,” Khelil said.
Some analysts believe the worst of the summer’s high gas prices may already have passed.
”I personally think we’re over the top,” said Leo Drollas, chief economist of the Center for Global Energy Studies in London. He noted that U.S. refineries were operating at 96 percent of capacity and that gasoline imports were flooding into the United States.
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