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OPEC Cool to Restricting Production

Posted on: Wednesday, 8 March 2006, 12:00 CST

By From news reports

OPEC oil ministers, unwilling to cut production with prices lingering above $60 a barrel, focused on the fear factor Tuesday: political instability, terrorist attacks and other forces giving markets the jitters.

Worries over Iran's nuclear ambitions, militant threats in Nigeria and attacks on Middle East facilities stoked concerns about supply disruptions as the oil ministers of the Organization of the Petroleum Exporting Countries gathered for a meeting here Wednesday to map out pumping and pricing strategies for spring and summer.

With consensus building against the idea of lowering production, a move that would send prices even higher, OPEC plans to assess "the influence of new political issues on the oil market," said Abdullah bin Hamad al-Attiyah, Qatar's oil minister.

Recent attacks by militants on Nigerian pipelines and oil facilities have reduced that country's production by 455,000 barrels a day. Nigeria normally exports 2.5 million barrels daily.

"The tangible, physical disruption of Nigerian supply has propped up prices over the past few weeks," said Jason Schenker, an economist with Wachovia. "That's a big deal. And then we just saw prices shoot up again over Iran."

Iran's OPEC governor, Hussein Kazempour Ardebili, has sought to reassure the world that his country's escalating standoff with the West over its nuclear program would not affect its exports of crude oil. "If we were able to reach a 'comfortable unease' on the Iranian situation, I think we'd see prices drop into the low 50s," Schenker said.

Kuwait's energy minister, Sheik Ahmed Fahd al-Ahmed al-Sabah, said OPEC was hoping to drive oil prices below $60 a barrel

Attiyah said oil ministers also would discuss demands on the market in the second quarter, a period when demand usually decreases. The International Energy Agency estimates that demand will fall by two million barrels a day in the April-June period.

Venezuela's oil minister, Rafael Ramirez, said he would press other OPEC members to cut production by at least half a million barrels of crude a day. Venezuela is one of the group's most strident voices in favor of constraining output to keep prices high.

"In the next quarter, there will be a normal fall in demand and we will have close to two million barrels a day of overproduction," Ramirez said. "It's a topic we have to evaluate." But Ramirez, whose country is the only OPEC member to call for a reduction, has not persuaded the rest of the cartel to go along at a time of political uncertainty. Mohammed al-Hamli, oil minister of the United Arab Emirates, said the cartel's output was "already adequate," and Sabah repeated Kuwait's view that OPEC should maintain its current output. The largest producer, Saudi Arabia, called Monday for OPEC to keep the oil quota unchanged to help cool oil prices.

OPEC's official output target is 28 million barrels a day, though that does not include Iraq, which adds an additional 1.5 million barrels. Some members have voiced concern that there could be a glut of up to two million barrels a day in the second quarter, in part because of a milder winter than usual in the Northern United States.

OPEC's acting secretary general, Mohammed Barkindo of Nigeria, said that he expected no surprises from the meeting Wednesday.

Source: International Herald Tribune

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