OPEC calls meeting to head off threatened oil glut

Published November 13th, 2000 - 02:00 GMT

OPEC ministers said Sunday they would discuss cutting oil production at a special meeting early next year, ignoring pressure to pump more crude because of sky-high prices. 


In a Vienna meeting extended by mourning over the Austrian train inferno, members of the 11-nation OPEC sought a pre-emptive strike to prevent a feared glut leading to a price collapse. 


While making no decisions now, the ministers called a special meeting for January 17 to assess demand in the winter, critical to estimates about whether crude oil supplies may flood the market. 


"We are giving ourselves more time until January to see how the market reacts," Qatar oil minister Abdullah al-Attiyah told journalists after informal OPEC talks. 


OPEC ministers, who chose Venezuelan oil minister Ali Rodriguez to be their new secretary general from next year, are worried about crude oil oversupply leading to a dramatic price fall early next year. 


"I have no doubt that prices will fall in the second quarter," Rodriguez told a group of reporters. "I don't think there is an oil crisis right now," he added. 


Kuwait's oil minister Sheikh Saud Nasser al-Sabah said the Organisation of Petroleum Exporting Countries (OPEC) would discuss a production cut at the January meeting. 


Ministers decided to delay their official Vienna meeting by a day until Monday morning after a funicular railcar inferno killed at least 154 people in Austria on Saturday. 


OPEC ministers expressed their condolences to the Austrian government and people, said Rodriguez, currently the OPEC president. 


"A tragedy on this scale is such that we should all mourn, sharing the pain of the Austrian people who have extended their hospitality to us for such a long time," said Rodriguez. OPEC has been based in Vienna since 1965. 


Oil prices have soared to above 30 dollars a barrel in recent months, prompting fuel price protests in consumer countries and threatening global economic slowdown. 


But OPEC ministers said they feared a future price collapse, citing expert forecasts that supplies at current levels would outstrip expected demand by at least a million barrels a day by March next year. 


And after agreeing to four production increases already this year, they all but ruled out allowing an OPEC price-band mechanism to automatically trigger a further 500,000 barrels a day increase at the end of November. 


"There is no mechanism in the world that replaces good judgment," said Saudi Arabian oil minister Ali Naimi. "You watch over the parameters and see if they have met your objective." 


The mechanism triggers an output increase if prices remain over 28 dollars a barrel for 20 working days or a production cut if they persist below 22 dollars for 10 consecutive working days. 


But several OPEC ministers argued against waiting too long before a cut, fearing a repeat of the 1998 slump when prices fell to less than 10 dollars a barrel. 


Asked whether OPEC should wait until the price mechanism system triggers a cut when prices fall below 22 dollars a barrel, Qatar's minister replied: "I hope not." Analysts said OPEC was trying to persuade the market that oil prices were now stuck at higher levels. 


"Generally OPEC is trying to convince the market that prices are in a new higher trading range," said Mehdi Varzi, a London-based analyst with Dresdner Kleinwort Benson. "Everybody here is concerned about how high the price is going to go but OPEC is concerned about how low the price is going to go after it has peaked," he told AFP. 


At a meeting of the Asia-Pacific Economic Cooperation (APEC) forum in Brunei, meanwhile, leading consumers agreed surging prices were in nobody's interest. 


"We discussed a lot about oil prices and Japan, the United States and Australia share concern that the current level of oil prices is not favourable to the global economy," Japanese trade minister Takeo Hiranuma told AFP in Bandar Seri Begawan. 

amaging to their economies.—AFP. 

©--Agence France Presse. 

© 2000 Mena Report (www.menareport.com)

You may also like