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Opec Pledge on Oil Supplies Amid Soaring Prices

Posted on: Wednesday, 1 February 2006, 09:00 CST

GLOBAL oil cartel Opec yesterday agreed to hold crude oil production steady amid soaring prices caused by supply worries in Iran, Nigeria and Russia.

Opec, which provides over a third of the world's oil, will keep production near a 25-year high of 28 million barrels per day.

The decision was made at a meeting of Opec's 11 members in Vienna where Iran reassured the West it had no plans to slash its oil exports despite a political row over its nuclear ambitions. It was feared that Iran would withhold some of its exports in protest at the threat of sanctions by the United Nations.

Iran insists its programme is peaceful but others suspect it is aiming to build nuclear weapons.

Oil prices climbed 12% in January to more than $68 a barrel on the back of the row and attacks by militants on Nigerian oil sites.

Attacks on platforms and pipelines in the oil-rich Niger Delta over the past month have killed dozens of soldiers and civilians and cut 10% of Nigeria's daily output.

Four foreign oil workers were kidnapped and held for nearly three weeks until their release yesterday.

The decision to leave oil production unchanged was widely expected following comments from some of Opec's most influential voices, including Nigerian oil minister and Opec president Edmund Daukoru and Saudi Arabian oil minister Ali al-Naimi. They said there was no reason why members should vote for a cut in production with oil prices so high.

In a statement following the meeting, Opec said prices "have continued to rise" despite the market being "well supplied".

Speaking from Vienna, oil expert John Hall, of John Hall Associates, said "ongoing concerns" in Iran and Nigeria had driven up oil prices and left Opec with little choice but to leave production levels unchanged. "Opec does not want oil prices to go below 50 US dollars a barrel, but with prices where they are there is no need to reduce output," he said.

It is thought Venezuela and Iran will look for a cut at the next meeting in March.

Oil analyst Richard Slape, of Seymour Pierce, said there were "no surprises" in yesterday's decision.

"A month or six weeks ago it looked as though Opec might cut output with weaker demand expected," he said.

Source: Daily Post; Liverpool

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