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OPEC rebuffs U.S. to stay on course for output cut
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posted January 16, 2001 10:08
By Tanya Pang
VIENNA, Jan 15 (Reuters) - OPEC oil producers pressed ahead on Monday with plans for a deep cut in crude supplies, reigniting concerns in the West about energy price inflation.
Determined to underpin the price of OPEC oil at $25 a barrel, the cartel is expected to slice exports by about 1.5 million barrels daily, just over five percent.
Saudi Arabia's Oil Minister Ali al-Naimi told reporters that the Organisation of the Petroleum Exporting Countries needed to make that scale of cut to keep international oil markets in balance.
Ministers, gathering to meet on Wednesday, fear anything less could see oil prices nosedive when winter demand peters out.
"All our figures indicate that there has been oversupply of crude over the past few months and stocks at the level of the consumer have risen sharply," OPEC Secretary-General Ali Rodriguez told Reuters.
"The cut in production is aimed at stabilising prices within the $22-$28 price band for OPEC's basket."
The West fears that a big cut in output could aggravate an economic slowdown in the United States by forcing up energy costs.
Those concerns were underlined by a rise in the price of oil futures in London on Monday. Brent blend crude gained 43 cents to $26.20 a barrel. U.S. light crude edged above $30 last week but OPEC's basket of inferior quality crudes still is valued below $25.
The United States, supported by the European Union, appears to have failed to persuade OPEC that it should make only a modest reduction.
Heavy lobbying from U.S. Energy Secretary Bill Richardson, finishing a six-nation OPEC tour on Monday, has fallen on deaf ears.
"They do not want any cuts at all because they want very low prices," OPEC's Algerian President Chakib Khelil told reporters in his Vienna hotel lobby.
KUWAIT SAYS 1.5 MBPD CUT STILL FAVOURITE
Kuwaiti Oil Minister Sheikh Saud al-Sabah said after his meeting with Richardson on Sunday that OPEC remained on course to lower deliveries by 1.5 million bpd.
That would cut output for 10 members to a collective 25.2 million bpd. Sanctions-bound Iraq is not party to OPEC's quota system.
Others, including Venezuela, Algeria, Indonesia and Qatar, will push for a larger reduction of up to two million bpd.
"Our position has not changed to back an oil cut of 1.5 to 2 million barrels per day," Venezuelan Oil Minister Alvaro Silva said after meeting Richardson in London.
Riyadh already has told its customers to expect a reduction in deliveries in February equivalent to its one-third share of an OPEC cut of 1.5 million bpd.
Washington argues that anything other than a modest cut could hurt already fragile economic growth in the world's biggest energy consuming nation.
OPEC looks at the issue from a different perspective. It is worried that slower world growth will translate into lower consumption of its crude.
"World economic growth is going to be slower this year than last and that will impact oil demand," said Rodriguez.
But he conceded that if cartel policy forced prices too high, then production could be lifted again.
"After cutting production, if prices rise too much we can always correct that because it's always more easy to correct an increase in price than a fall."
Key to price movements will be the impact on inventories of the output curbs.
Stocks of crude and petroleum products that fell dangerously low last year are on the mend but consumers fear that OPEC's intended action will halt stockbuilds prematurely.
All times are PT (US)
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