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OPEC Sees No Cutback in Output Kuwait Oil Minister Predicts Price Drop

Posted on: Thursday, 9 March 2006, 12:00 CST

By From news reports

The Organization of the Petroleum Exporting Countries all but abandoned the idea of cutting production to ease stubbornly high oil prices at a meeting Wednesday, and Kuwait's oil minister predicted prices would fall below $60 a barrel in the second quarter.

Oil ministers from Kuwait and Qatar said ahead of a formal announcement that they expected OPEC to hold output steady. Officials from Saudi Arabia, Nigeria, the United Arab Emirates, Libya and Algeria have also said this week that they back the status quo. OPEC members said they wanted to be cautious against lowering output at a time when extremists are attacking energy installations in Nigeria and the Middle East. In Nigeria, about one-fifth of its production has been cut by violence, easing pressure on the group to reduce its oil quota to compensate for a seasonal drop in demand, OPEC's president, Edmund Daukoru, said.

The meeting comes as crude prices show few signs of declining, restraining global growth and contributing to higher costs for consumers and industries. Possible sanctions against Iran and an attack last month against a Saudi Arabian oil center has also stoked concern that rising energy costs will hurt the world economy.

Several OPEC members, including the Kuwaiti oil minister, Sheik Ahmad Fahd al-Sabah, said they expected the price of oil to dip below $60 a barrel in the second quarter, then rise again in the longer term.

Prices would have to fall to close to $50 a barrel for OPEC to consider pulling back production, and "there is too much turmoil in the world right now for prices to come off that far," said Paul Hutchins, a broker with Amerex Futures in London.

Oil in New York, which has averaged more than $63 a barrel this year, slipped this week on speculation OPEC would leave production unchanged. Brent crude oil in 2006 has averaged more than $62 a barrel

Oil prices have also been supported by a dispute over Iran's nuclear program. The United States and the European Union say Iran wants to develop nuclear weapons, a charge the country denies.

The United States and Russia on Tuesday told Iran OPEC's second- biggest producer to obey international demands to limit its nuclear program, with Vice President Dick Cheney pointing to "meaningful consequences" for defiance and a top Russian official saying his government had no new solutions to offer.

In a second day of meetings in Vienna, diplomats at the United Nations' nuclear agency, the International Atomic Energy Agency, were discussing a Russian proposal that would permit Iran to continue atomic research and avoid possible sanctions by the Security Council.

The proposal is not acceptable to the United States, which wants the Security Council's power to sanction Iran for its enrichment- related activity, a State Department spokesman said. OPEC has kept its 28 million barrel-a-day output target for the 10 members outside Iraq for the past eight months, after raising it five times during the previous year to meet faster-than-expected demand from countries including China.

But strife in some OPEC member-countries may make it harder for the group to reach its targets.

Militant violence in Nigeria since late December has disrupted exports from the Western Delta region following attacks on pipelines, export terminals and staff kidnappings in January and last month. The country is OPEC's sixth-biggest producer, pumping about 2.28 million barrels a day, and the No. 5 supplier of oil to the United States.

Royal Dutch Shell's Nigerian joint venture has halted 455,000 barrels a day of production since Feb. 19. Chevron's venture in the country has cut 13,000 barrels a day after a separate incident.

Nigeria has also shut down another 150,000 barrels as a precaution, Daukoru, who is also Nigeria's oil minister, said Tuesday.

OPEC may meet again in the Qatari capital, Doha, in April to review production levels.

The International Energy Forum will take place in Doha in April and many of the ministers are expected to attend. The next regularly scheduled OPEC meeting is June 1 in Caracas.

Source: International Herald Tribune

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