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| International-UN-NGOs |
| Opec announces surprise oil output reduction |
| 2004-02-10 |
| The Organisation of Petroleum Exporting Countries on Monday promised to slash 10 per cent of its output by April, in a bid to prop up prices ahead of the summer, when demand in its largest markets falls steeply. The powerful 11-country oil cartel, meeting in Algiers on Monday, resolved to stop cheating on its 24.5m barrel a day quota immediately, a move which would cut output by 1.5m barrels a day. we’ll see how long that lasts Opec’s 10 active members - Iraq’s struggling industry is not subject to the quota - then intend to reduce their quota on April 1 by a further 1m barrels a day to 23.5m. Much of the reduction would have to come from Saudi Arabia, the group’s biggest and most influential member. The decision pushed oil prices higher, with Nymex crude, the US benchmark, jumping 72 cents to $33.55 a barrel by midday in New York and IPE Brent, the European benchmark, rising 73 cents to trade at $29.84. "This decision is preemptive action against a fall in prices," said Obaid bin Saif Al-Nasseri, United Arab Emirates energy minister. Opec is worried about a short-term price collapse as the winter comes to an end in the US and Europe - the largest importers of oil. Demand for oil drops substantially between April and June as heating oil is no longer needed. They’re also terrified as Iraqi production approaches its level under Saddam - and potentially goes way beyond that. The production cut comes despite the fact that oil prices have in recent months been consistently above Opec’s preferred range of $22-28 a barrel, although this was defined before the dollar’s steep decline. "The price now is high, but do you know what the price will be in April, May, June?" said Ali Naimi, Saudi Arabia’s energy minister. "Should we wait until we have a crash and then work like we did last time? In 1998 it took us almost two years to get things back to normal." According to the International Energy Agency, the developed world’s energy watchdog, demand for Opec’s oil would plunge to 23.3m barrels a day during that time. The IEA estimated Opec - including Iraq - produced nearly 29m barrels a day in December, the highest level since March 2001. When Opec meets in Vienna on March 31 it could reverse its decision if it finds demand and oil prices remain high, delegates said. Mr Al-Nasseri said: "If prices stay at current levels or if they go higher, we would reconsider." The US, the world’s largest consumer of oil, reacted cautiously. "It is our hope that producers do not take actions that undermine the American economy and American workers, and American consumers for that matter," said Trent Duffy, a White House spokesman. So far, high oil prices have shown little sign of holding back the US economic recovery. Analysts said the impact of Monday’s announcement is expected to be further limited by the fact that Opec members desperate for revenue are unlikely to adhere to all the cuts the cartel announced. Oil prices have hovered above $30 a barrel in part because large funds have continued to buy oil as Iraq struggles to return to the market, storage levels in major consuming countries remain low and demand from the US and China grows at a faster rate than expected. Josh Sadler, vice-president of energy trading for Societé Générale, said in a report that Opec’s aim may have been to reassure investors. "Even if the practical reality of such a cut is complicated, the psychological effect is certain." true enough - the lower dollar has been affecting derivative securities in a variety of commodities. And since oil is priced in $$, a lower $$ means less purchasing power to OPEC sellers. |
| Posted by:rkb |
| #6 The Russians will stand to profit from any OPEC supply cuts,as they've done in the past.Watch for Putin to milk his leverage with the West before that,however. |
| Posted by: El Id 2004-2-10 6:05:06 PM |
| #5 The proof is in the pudding. If oil prices go to $40, we'll know they've cut production. If not, we're seeing more of a long tradition of cheating by OPEC members. |
| Posted by: Zhang Fei 2004-2-10 5:53:29 PM |
| #4 Gee, y'think Iraq might ignore OPEC's quota system? |
| Posted by: mojo 2004-2-10 5:35:10 PM |
| #3 Halliburton is working with a fixed margin as anyone would be. Overcharges will be rectified. Take a prozac or whatever and relax a little. Big business will go on in spite of this crap. Hell this is good if Iraqi oil production goes up. Who said oil ain't grand. |
| Posted by: dataman1 2004-2-10 4:54:07 PM |
| #2 if oil is involved you can bet chainey is to |
| Posted by: muck4doo 2004-2-10 4:50:53 PM |
| #1 Get them Iraqi pumps going and start disributing the wealth to the Iraqis. Money always works. |
| Posted by: dataman1 2004-2-10 4:45:59 PM |