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OPEC Raises Quota a 5th Time as Oil Price Surges (Update1)
It looks very much like we have reached OPEC's absolute capacity to supply oil. Its not clear what happens next (apart from a wrenching recession) but I'm guessing things that seem unthinkable today will rapidly come onto the agenda. Khuzestan becomes liberated Arabistan? A Kurdish corridor to the sea?  The Organization of Petroleum Exporting Countries agreed to increase output quotas by 1.8 percent, acknowledging that four increases in production in the past 12 months failed to stop oil's surge above $50 a barrel. The group, which pumps almost 40 percent of the world's oil, will boost quotas by 500,000 barrels a day to 28 million a day, said Saudi Oil Minister Ali al-Naimi. OPEC is already supplying that amount, and ministers from Iran, Venezuela and Kuwait earlier said additional oil supply isn't imminent. The OPEC president, Sheikh Ahmad Fahd al-Sabah of Kuwait, will have the authority to seek another increase later as needed. ``The quotas have become meaningless,'' said Julian Lee, an analyst at the Centre for Global Energy Studies, a London-based consulting company founded by former Saudi oil minister Sheikh Zaki Yamani. ``The only likely way out of $50 to $55 a barrel oil is a dramatic slowdown in oil demand. There's no new source of supply that's going to come on stream.'' OPEC members want to lower prices to prevent a further weakening of the world economy, which would hurt oil demand. The International Monetary Fund forecasts world economic growth will slow to 4.3 percent in 2005 from 5.1 percent in 2004, and Group of Eight finance ministers last weekend said higher energy costs are a ``significant concern.'' Crude oil futures were up 44 cents at $55.44 a barrel on the New York Mercantile Exchange as of 12:39 p.m. in London. Prices reached a record $58.28 a barrel on April 4. Concern that crude oil demand may exceed production later this year has extended to the refining industry as processing plants run close to their limits. SNIP Posted by: phil_b 2005-06-15 |
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