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Opec fails to agree on date for cut in output
Some members of the Organisation of Petroleum Exporting Countries on Monday suggested the oil cartel postpone implementing the production cut it agreed last month. However, others stuck by the April 1 start date to reduce the group's production quota by 1m barrels a day to 23.5m b/d. That sent mixed signals to an already nervous oil market where some large institutional investors are beginning to cash in on their record long positions. Opec, which controls almost 40 per cent of the world's supply, will meet on March 31 to decide whether to stick to its decision last month to reduce its quota in expectation of lower demand this spring. Chakib Khelil, Algeria's energy minister, said: "Algeria feels that the decision that was made in Algiers on February 10 is a prudent and precautionary measure to avoid a tremendous fall in oil prices." He said the reduction was prudent "because in the second quarter we are going to have a lower demand of 2.5m b/d and if the hedging funds pull out of the market, we are going to have at least a $7 drop in prices".
This guy's lucky to have a country.
Others in the group have suggested the organisation should delay its decision while oil prices are still so high, but it is not yet clear who backs which proposal and, most importantly, what Saudia Arabia - Opec's biggest member - thinks. Obaid bin Saifal-Nasseri, United Arab Emirates oil minister, said: "The idea [of the delay] will be submitted along with other ideas for discussion at Opec's ordinary ministerial meeting on March 31 in Vienna." Nymex oil futures in New York were down 97 cents at $37.11 per barrel. Brent was 46 cents lower at $32.80. A report by the Commodity Futures Trading Commission on Friday showed funds held a net long position in crude oil futures and options contracts of 125,313 contracts last week, 4,422 less than the week before and 10,000 contracts below the record.

Some economists and analysts said Opec's worry about a price collapse as demand for winter fuels subsided in the western hemisphere was misplaced. Opec's obsession with the need to cut output to prevent an oil price collapse in the fourth quarter four looked increasingly out of step with the behaviour of the oil market, the Centre for Global Energy Studies in London said in its monthly report on Monday. Opec ought to have little difficulty in keeping oil prices at or above $28 a barrel in 2004, a level that appears to have become the organisation's first line of price defence in what is a tight market. Demand from China and the US has been especially strong in the past year, surprising many analysts. Even if Opec decides at its meeting in Vienna next week not to postpone the implementation of its quota cut, it is by no means assured that the group will be able to enforce its decision, especially if prices remain strong, analysts say.
We ought to be encouraging dissenters at OPEC, and elsewhere. Perhaps persaude our new friends the Iraqis to pump a little more?

Posted by: Steve White 2004-03-23
http://www.rantburg.com/poparticle.php?ID=28849