OPEC oil ministers spoke out Wednesday against increasing crude production at this week's meeting, despite concerns that expensive oil could be gnawing away at the global economy.
The comments, by the oil ministers of Nigeria and Kuwait as well as a senior Libyan oil official, reflected satisfaction on the part of the Organization of Petroleum Exporting Countries with present prices.
Further indicating that the oil ministers will opt to keep output at levels agreed on at their last meeting when they convene Thursday, an OPEC advisory panel recommended the organization focus on greater compliance with maintaining present quotas.
The panel, which advises the 12 full members of the Organization of Petroleum Exporting Countries on policy decisions, is also recommending the group meets again in June, according to officials who attended the meeting. The committee is comprised of ministers from Iran, Nigeria and Kuwait.
OPEC officials said the committee estimates current compliance with the two rounds of cuts agreed on in October and December is at about 70 percent.
In its monthly oil report on Thursday, the International Energy Agency said that _ without Iraq and Angola, which are not bound by quotas _ daily OPEC oil production last month was at 26.8 million barrels a day. Total OPEC output last month averaged 30.2 million barrels _ 400,000 barrels less than OPEC should produce to meet world demand, said the IEA, the energy watchdog of the world's major industrialized countries.
Plunging stock markets have raised questions about the health of world economies, and with it the future prospects of strong crude demand, despite predictions that the world's appetite for OPEC oil is on the rise.
Asian and European stocks dropped Wednesday after Wall Street's second-biggest point drop in four years rattled already nervous markets. The tumble came just as international markets were recovering from sharp declines earlier this month amid concerns about overvalued stocks and a U.S. slowdown.
"I will strongly argue against this, we're not there yet," said Nigerian Oil Minister Edmund Daukoru, when asked if the 12-nation organization would contemplate raising output ahead of the high-demand North American driving season at its meeting Thursday.
Two cuts in the past four months have contributed to relative stability that has kept benchmark crude between US$50 and US$60 a barrel _ down from the record highs of above US$78 a barrel last summer, but still around 40 percent above 2004 levels.
On Wednesday, oil prices were down after U.S. petroleum inventory data showed an increase in crude stocks but declines in gasoline and distillate stocks, which include heating oil and diesel fuel. Light, sweet crude for April fell 29 cents to US$57.64 a barrel on the New York Mercantile Exchange. April Brent on the ICE Futures exchange slipped 9 cents to US$60.81.
Present prices leave comfortable profit margins both for producers and the major oil companies while remaining below the pain threshold that leads to less world consumption _ and increased interest in alternative fuels such as ethanol and wind and nuclear energy.
But with the traditionally high-demand North American summer driving season approaching, there is little likelihood of a near-term prolonged slide in prices _ and of resulting production cutbacks any time soon. Instead, OPEC might be looking at pressure to increase production at its next meeting, likely in June.
Kuwait's oil minister, Sheik Ali Al Jarrah Al Sabah, said his country supported keeping output levels where they are, and Shokri M. Ghanem, head of the National Oil Corp. of Libya, also suggested OPEC would opt for the status quo.
"I don't think there is a real need for doing anything," Ghanem said Wednesday. Asked if and when OPEC might raise production ahead of the high-demand summer driving season he said only: "If there is a need for more oil we will put in more oil."
Al Sabah, too, suggested the group could act if supplies became scarce, telling reporters: "If it's tight, OPEC will fill any gap." But he also refused to specify when any production increase could occur.
"I think they are all comfortable ... because prices are at their acceptable level," said independent oil analyst Kamel A. Al-Harami, former president of Q8, the retail arm of the Kuwait Petroleum Corp.
The 10 OPEC members bound by quotas agreed to total cuts of 1.7 million barrels a day in October and February. And while analysts say that the reductions have not been fully implemented, they have kept prices at levels OPEC feels comfortable with.
Iraq is not subject to the quotas. But raising hopes that the nation's battered oil sector may be heading toward some stability, oil minister Hussein al-Shahristani told Dow Jones Newswires he has been in discussions with oil giants Royal Dutch Shell PLC and Total SA over developing the country's vast oil resources, and that he expects a handful of projects to be put up for bidding later this year.
U.S. government officials and Iraqi politicians have hailed a draft law that would allow foreign investment into the politically charged oil sector, resulting in what officials would be a start to rebuilding a dilapidated and war-torn industry.
They also hope that new oil revenue, distributed fairly to the country's fractious regional, ethnic and religious groups, will underpin Baghdad's shaky central government.
But oil company executives have said the legislation is still too ambiguous to trigger any meaningful negotiations between companies and government officials.
If passed, the initiative would legally permit some sort of foreign participation in the oil sector. That in itself would be a very big step, because the country's oil wealth is politically sacred. The nationalization of the oil industry in the early 1970s under Saddam Hussein was a hugely popular move, and many Iraqis are still wary of foreigners exploiting their fields.