Oil markets seemed unfazed on March 19th by OPEC’s decision on March 17th to cut production by 1 million b/d effective from April 1st.
The cartel’s second cut this year will reduce production by 4 percent to 24.2 million b/d in an effort to prevent falling oil prices in the second quarter.
The Bush administration called the news “disappointing,” particularly in light of looming world economic slowdowns.
U.S. Energy Secretary Spencer Abraham said that OPEC’s move “demonstrates the importance of increasing America’s domestic production and developing a national energy policy that will ensure a stable, reliable, affordable and diverse supply of energy.”
OPEC ministers decided to take action after two days of discussions in Vienna and agreed to meet again in June to further assess market conditions.
The official OPEC communiqué said that: “The present weaker world economy and the traditional sharp downturn in demand associated with the second quarter both clearly point to the need for a correction in oil supply, and the conference has taken the decision to stabilize the oil market.”
Industry sources indicated on March 19th that Saudi Arabia had already informed oil majors that crude volumes would be cut in April by an extra 6.5 percent from March supplies.
But, Saudi Oil Minister Ali Naimi attempted to reassure consuming nations that OPEC would move to raise production if prices climbed above $28 a barrel for the OPEC basket of crudes. Naimi said that: “We may have to add more to the market before the June meeting.”
Non-OPEC producers Mexico, Angola, Oman and Russia have indicated that they will work with the cartel to maintain stable prices, although only Mexico is considered likely to make any significant change to supply levels.
Mexican Deputy Oil Minister Juan Antonio Barges said following the OPEC meeting that his country would make a decision about a reduction in its output on March 19th or 20th.
© 2001 Mena Report (www.menareport.com)