Oil prices stabilized Monday after a largely anticipated output cutback announced over the weekend by the Organization of Petroleum Exporting Countries.
In New York, the April light sweet crude contract fell 59 cents to $26.15 a barrel. Earlier in London, the price of a barrel of Brent North Sea crude for May delivery firmed by 20 cents to $25.25.
Analysts said that the OPEC decision Saturday to cut production by one million barrels per day, or around four percent, had been all but factored into the market.
"I think a 750,000 to one million barrel cut was already in the market," said ABN Amro trader Richard Bend.
"Also taking into account that Iraq asked for an increase in the daily output of their exports of 250,000 barrels a day, that would bring it down to 750,000" barrels per day, he said.
OPEC has now cut output by almost 10 percent this year to rescue prices, which have fallen from high points above $35 a barrel last year to below $24 in recent days.
OPEC's own basket price of seven crudes, which it uses to help set production policy, stood at 23.09 dollars a barrel on Friday, up from $22.77 on Tuesday, the Vienna-based OPEC news agency said.
OPEC, which is targeting a basket price of $25, is concerned that prices could slump as demand wanes going into the northern hemisphere summer.
"We are trying to ... prevent the situation that happened in 1986, in 1998, or even in 2000 when oil prices went through the roof and we acted four times to lower the oil price," OPEC President Chakib Khelil told reporters in Vienna.
An excess of oil could spark a "downward spiral and a collapse in prices, which would be detrimental to producing and consuming countries" and undermine investor confidence, he said. But consumer countries expressed concern at the size of the cut.
"This nation's last three recessions have all been tied to rising energy prices, and there is strong evidence that the latest crisis is already having a negative effect (on the US economy)," US Energy Secretary Spencer Abraham said.
He cited a National Association of Manufacturers survey which showed that soaring fuel prices between 1999 and 2000 cost the US economy over $115 billion - a full percentage point of gross domestic product.
White House spokesman Ari Fleischer called the move by OPEC a disappointment. "The president will continue to work with our OPEC allies, focusing on the long term. But there's no getting around it; their actions over the weekend were a disappointment," he said.
Analysts warn that as refineries begin to process more crude in May to meet rising gasoline demand in the US summer "driving season," prices could rise uncomfortably high for consumer countries already struggling to fend off a global economic slowdown.
Khelil however said consumers should look closer to home for someone to blame for high prices at the pump.
"Before they point the finger at OPEC they should probably reduce taxes in their own countries," Khelil said. In Europe, crude prices are only 20 percent of the price consumers pay for gasoline, he said.—AFP.
©--Agence France Presse 2001.
© 2001 Mena Report (www.menareport.com)