Oil markets are perplexed about OPEC’s next move when the group’s ministers meet on March 16th in Vienna, following contradictory statements made by the cartel’s top official, OPEC Secretary General Ali Rodriguez.
The front-month price for U.S. benchmark crude West Texas Intermediate (WTI) fell below $28 a barrel on February 27th, in part on OPEC’s inconsistent statements.
The secretary general said on February 26th that OPEC may not cut its output again when the group meets in March if the price of OPEC’s basket of cruds remains roughly where it currently is.
That contradicted statements he made the week before that there was near “consensus” for the group to cut its overall production at the March meeting and that a 1 million b/d reduction was not out of the question.
OPEC had cut its output at its January 17th meeting by 1.5 million b/d. Rodriguez, defending his change of tune, said on February 26th that: “If the price remains stable there shouldn’t be a cut, but it all depends on the forecasts for the rest of the year and particularly for the second quarter.”
The OPEC basket price fell to $24.42 a barrel on February 26th from $24.64 on February 23rd.
The OPEC chief, who is considered a price hawk within the group, said that a possible slowing of the U.S. economy could affect demand forecasts considerably.
Although global oil demand is expected to climb by 1.4-1.5 million b/d in 2001, the move from winter into the second quarter could see a drop in demand by as much as 2 million b/d. Rodriguez added that: “We base our decisions on market fundamentals, but our objective is price stability.”
© 2001 Mena Report (www.menareport.com)
