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| Home Front: Politix |
| OPEC’s Resolve to Cut Oil Output Weakens |
| 2004-03-26 |
| I’ve put this under politics because of the obvious link between oil prices, the economy and the US election this year. OPEC’s plan to cut its oil production target by 4 percent appears to be unraveling, as group members ignore their self-imposed quotas to take advantage of high crude prices and meet the surging demand for oil in China and the United States. Despite announcing two production cuts in six months, the Organization of Petroleum Exporting Countries has boosted its actual output to try to keep pace with the rising market. OPEC agreed last month to reduce its output ceiling by 1 million barrels a day starting April 1, in an effort to keep prices from tumbling during a seasonal lull in demand this spring. and to punish Bush But as OPEC representatives prepare to meet Wednesday in Vienna, Austria, to review the oil market, some are no longer treating next month’s cut as inevitable and are suggesting instead that all options - even an increase in output - are now open. That could portend cheaper and more plentiful crude, but it probably wouldn’t be enough to comfort American motorists. U.S. gasoline prices have risen to a record national average of $1.75 a gallon due mostly to a robust domestic demand, limited refining capacity and concerns about possible shortages in blending components for reformulated gasoline. Some analysts say that any foreseeable increase in oil supplies probably wouldn’t translate into bigger gasoline inventories in time for the peak summer driving season. but they would in time for the Fall election - and the last thing the oil producers want is political sentiment to drill in ANWR or build more nuclear power plants .... Crude prices have risen by about $6 a barrel since OPEC announced its latest cut on Feb. 10. U.S. prices have bumped uncomfortably close to the psychologically important threshold of $40, though they’ve backed off somewhat in recent days on evidence of a build-up in crude inventories. Futures contracts of U.S. light, sweet crude for May delivery were trading Friday afternoon at $35.68 in New York. "You’d have to be a complete idiot to cut production when prices are at these levels," said Adam Sieminski of Deutsche Bank in London. and your point is???? Excluding Iraq, which doesn’t participate in the group’s quota agreements, OPEC has pumped an estimated 26 million barrels a day so far in March. The logistics of reducing crude shipments now would make it impossible for the group to comply with its new ceiling of 23.5 million barrels even if it wanted to, said Leo Drollas of the Center for Global Energy Studies in London. Costlier crude is now a political issue in major importing countries. White House Chief of Staff Andrew Card urged OPEC this week to increase its production and said the Bush administration would be talking to its "allies" in the group to ensure that they kept supplies flowing, he told MSNBC television. "Who wants to be a bigger Billionaire by supplying the US?" OPEC’s 11 members supply about one-third of the world’s oil. The group’s president, Purnomo Yusgiantoro, told reporters this week that OPEC would discuss three possible strategies when its delegates meet Wednesday in Vienna, Austria: trimming the output target as planned, leaving it unchanged at its current level of 24.5 million barrels a day, or raising it. Purnomo’s newfound flexibility attests to the mixed signals coming from the oil market. Although crude prices are high, some analysts insist there is no real shortage. They point instead to futures markets, where an unusually large number of "long" positions have helped drive the market upward. Gee, who could be manipulating those??? A long position is one in which a trader pays a fixed price for a paper contract of crude in the expectation that prices will rise and let him cash in his contract later for a profit. At the same time, many analysts - including those at OPEC - foresee an excess in physical supplies of crude this spring. Purnomo predicted that global demand for oil would fall by 2.5 million barrels a day in the second quarter. Wary of a consequent plunge in prices, OPEC announced pre-emptive cuts in its output ceiling in September and again six months later in February. However, the unexpected strength in demand from China and the United States has eroded OPEC’s resolve to follow through on either cut. cold winter here, growth there "I’m very confused now - the market is also very confused," Qatar’s Oil Minister Abdullah bin Hamed al-Attiyah said this week. One possible result would be a decision to postpone the planned decrease in OPEC’s production ceiling. Obaid bin Saif Al-Nasseri, oil minister of the United Arab Emirates, said earlier this month that OPEC might need to reconsider its decision to lower the ceiling, though he later backtracked and said a postponement was just one idea among many. The slow and fitful recovery in crude production from Iraq and Venezuela should help ease OPEC’s anxiety about a springtime plunge in prices. "Certainly there’s no likelihood of a collapse," said Deutsche Bank’s Sieminski. hard to sort out the motives here. Profit-taking, revenge against Bush and a fear of Iraq coming on line ... perhaps also a desire to generate cash to pump into at least the image of "refoms" at home. ??? |
| Posted by:rkb |
| #1 [Off-topic or abusive comments deleted] |
| Posted by: Anonymous TROLL 2004-03-26 8:14:59 PM |