OPEC Welcomes And Warns Bush
One day after U.S. President-elect George W. Bush said his administration planned to work closely with OPEC nations to encourage the group to open up its spigots to bring crude prices down, OPEC’s president warned that that the oil cartel was still intent on cutting its output when the group next meets on January 17th, 2001 – just three days before Bush is sworn into office.
Venezuelan Oil Minister Ali Rodriguez, who steps down as OPEC president to become the group’s next secretary general on January 1st, 2001, did say, however, that the organization was looking forward to talking to Bush about several problems that have kept crude prices high, including: “Issues such as correcting the problem of speculation in the markets, the problems of refining in the U.S. which hits the price of refined products, and transport problems.”
Responding to Bush’s call for another OPEC increase in output, Rodriguez said that: “At the moment there is oversupply of oil and inventories have risen a lot.”
The OPEC official also noted that if current prices – which have plunged roughly $9 a barrel since OPEC last met on November 12th-13th in Vienna – remain where they are now, the cartel would cut supply at its January gathering.
According to OPEC’s price band mechanism, if the average price for the OPEC basket of crudes falls below $22 a barrel and remains below that level for 10 days, the group would automatically cut production by 500,000 b/d.
“The established amount would be 500,000 b/d, but if we conclude that more is needed, we will do so,” Rodriguez said.
Some of the group’s price hawks, including Iran and Kuwait, believe that a cut of at least 1 million b/d is more in order.
The OPEC basket price fell to $22.26 a barrel on December 20th, a steep drop from the basket price of $23.87 on December 19th.