IE 11 is not supported. For an optimal experience visit our site on another browser.

OPEC ministers will forgo cut in crude output

OPEC agreed Wednesday to keep its production level unchanged amid the political instability and terrorism that have been unnerving global markets, but said it would pay close attention to demand and high prices between now and summer.
/ Source: The Associated Press

OPEC said Wednesday it would keep pumping at current levels to ensure adequate supplies as extremists target oil facilities from the Middle East to Nigeria and a confrontation escalates over Iran’s suspect nuclear program.

Edmund Daukoru, president of the Organization of Petroleum Exporting Countries, said the output quota would remain untouched at 28 million barrels a day, but that the 11-nation cartel would keep close tabs on the situation in the period when demand traditionally eases between now and summer.

Daukoru conceded the group was preoccupied with prices that have hovered for months above $60 per barrel — well over the $40-$50 range that many OPEC members have called optimal — but he refused to say what price threshold would trigger action.

“We are concerned that prices don’t get out of hand — that there’s some sanity to price levels,” Daukoru said.

“One thing OPEC tries to do is preserve market stability,” he added. “We have said we will continue to monitor closely, and depending on what we see we will do what is best for the market. ... We need to know more about demand.”

Demand is expected to slide by up to 2 million barrels a day in the second quarter.

But OPEC’s decision to leave production levels alone won’t bring beleaguered motorists any relief at the gas pumps, said Jason Schenker, an economist with Wachovia Corp. He predicts retail gas prices could rise with the approach of the summer driving season because of higher transportation costs and expenses for ethanol blending. The refining industry is introducing ethanol as a substitute for methyl tertiary butyl ether, or MTBE, in summer blends of gasoline.

“We’re not looking for a marked increase, but we could see prices higher than last year,” he said.

OPEC pumps about a third of the world’s oil, although Daukoru said it would hold about 40 percent of the market through 2010 and could hit 50 percent thereafter. Its daily quota does not include about 1.5 million barrels added by Iraq — a comparative dribble that also worries some members.

Kuwait’s oil minister, Sheik Ahmed Fahd Al Ahmed Al Sabah, said he expects prices will drop below $60 a barrel between April and June, but are likely to rebound to the $60 range in the fourth quarter. He said he believes political turmoil and extremism have added $5 to $8 to each barrel.

Underscoring how world events are buffeting the market, OPEC issued a statement acknowledging that “world crude oil prices remain volatile, these being driven by geopolitical factors and associated concerns regarding potential future supply disruptions.”

It stressed, however: “The market is fundamentally well-supplied with crude oil.”

Daukoru said OPEC’s next meeting would be June 1 in Caracas, Venezuela. That country’s oil minister, Rafael Ramirez, said he would try anew to push through a cut of at least half a million barrels a day.

Iran’s minister of petroleum, Kazem Vaziri Hamaneh — whose country is locked in a standoff with the West over its nuclear activities — insisted that Tehran would not retaliate by halting or cutting back on oil exports.

“So far there’s no reason to reduce exports. Iran has no intention whatsoever of reducing its oil exports,” he said as the International Atomic Energy Agency’s 35-nation board, also meeting in Vienna, weighed whether to press for deeper involvement with Iran by the U.N. Security Council.

Iran insists its nuclear program is peaceful and geared solely toward generating electricity; the United States and others contend it is covertly trying to make atomic weapons.

Oil prices have remained stubbornly high for months, but dropped below $60 after OPEC’s announcement and data from the United States showing a sharp rise in crude stockpiles. Light, sweet crude for April delivery fell $1.93 to $59.65 a barrel in afternoon trading on the New York Mercantile Exchange. The contract has fallen more than $3 this week since Friday’s settlement price of $63.67.

Saudi Arabia has tightened security measures around its energy installations in the wake of the Feb. 24 bombing outside the gates of its Abqaiq facility, the world’s largest oil-processing plant, Saudi Oil Minister Ali Naimi said Wednesday.

Recent attacks by militants on Nigerian pipelines and oil facilities have left the country’s production still down by about 400,000 barrels a day. Daukoru said a total of 556,000 barrels a day had been shut down and that Nigeria, which normally exports 2.5 million barrels daily, also has boosted security.