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Author Topic:   U.S. says OPEC oil output cut was a 'mistake'
posted January 18, 2001 09:44     Click Here to See the Profile for Vatandoost   Click Here to Email Vatandoost     Edit/Delete Message   Reply w/Quote
By Tom Doggett

WASHINGTON, Jan 17 (Reuters) - The Clinton administration, which had lobbied OPEC oil ministers to maintain their oil production levels or make only gradual cuts, said on Wednesday the cartel's planned cut of 1.5
million barrels per day was a "mistake" and could trigger oil price swings in world markets.

"It's certainly very clearly a mistake and we're disappointed in their decision," U.S. Energy Secretary Bill Richardson told reporters when asked about OPEC's move.

The action by the Organization of Petroleum Exporting Countries came just three days before President-elect George W. Bush is sworn into office.

Bush has not commented directly on OPEC in recent days, but has repeatedly vowed to increase domestic oil production to reduce U.S. dependence on imports, which account for 55 percent of domestic petroleum supplies.

Last weekend, the Clinton administration dispatched Energy Secretary Bill Richardson to the Middle East to meet with ministers of a half-dozen OPEC members in an attempt to stave off an immediate cut in global oil
production that could raise prices and hobble a slowing U.S. economy.

Richardson told reporters the good news was OPEC cut output by 1.5 million barrels a day, and not by the 2 to 3 million barrels he had feared before he went on his lobbying tour.
"We partially succeeded, but not enough to declare victory," Richardson said.


Nonetheless, Richardson said was it was "disappointing" that OPEC member governments decided to make any cut in their oil production quotas, which he said would lower world oil inventories and cause more crude oil price swings in markets.

"We are a bit disappointed, but pleased the cut was not as steep," he said.

OPEC met earlier Wednesday in Vienna and agreed upon a five percent reduction in oil output to help keep crude prices near $25 a barrel. The cartel said it might slash production again in March if needed to hold
prices in its target range.

The cut means OPEC will have an official production quota of 25.2 million barrels a day beginning in February.

Richardson said he would urge his successor to "act quickly to meet" with OPEC ministers. Spencer Abraham, a former Michigan senator, is Bush's nominee to head the Energy Department and will begin confirmation hearings on Thursday. "The dialogue between consuming and producing countries -- a dialogue embodied in the consumer/producer meeting in Riyadh last November -- needs
to continue and intensify," Richardson said.

Richardson and Abraham were to meet on Wednesday afternoon to discuss OPEC and the current U.S. energy situation.

Experts with the U.S. Energy Information Administration released data last week showing an OPEC cut of 1.5 million barrels a day would raise U.S. crude oil prices to an average $30.20 per barrel in April, $31 in June and $32.40 in December. Crude oil futures traded in New York ended down 69
cents, at $29.60 a barrel, on Wednesday.

Separately, Richardson said he would soon decide whether to issue emergency orders requiring firms to sell electricity and natural gas into the power-strapped California market.

California has been suffering from supply shortages and soaring electricity prices under a controversial 1996 law that partially
deregulated electricity prices.

The electricity crisis became so dire on Wednesday that officials began rolling blackouts that shut off power to some areas to avoid collapse of the entire power grid.

Richardson said he was "leaning toward" extending a current order, which expires at midnight, forcing energy firms to supply surplus electricity to the California market.

He said he was also "awaiting instructions" from President Bill Clinton on whether to issue a new emergency order telling energy firms to sell natural gas to California's utilities.

Richardson said he would discuss with Abraham whether the emergency supply orders, if they are issued, can be extended past Saturday when the Clinton administration leaves office.

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