OPEC oil exporters were poised Wednesday to maintain crude output at current levels, having few other options in the face of tumbling oil prices and a sharply slowing global economy.
OPEC remains committed to its target of crude oil at $25 a barrel, Saudi Oil Minister Ali Al-Nuaimi said Wednesday, September 26, ahead of a meeting of the cartel. "Twenty-five remains our objective," he told reporters hours ahead of a meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna. "We have a definitive objective of a stable price," added the Saudi minister, the kingpin of the cartel.
The OPEC oil cartel was set to leave its production quotas unchanged at a meeting in Vienna Wednesday, a senior OPEC delegate told reporters. "Today? no change," said the delegate, requesting anonymity, when asked what the Organization of Petroleum Exporting Countries (OPEC) ministers would decide to do about its output quotas.
The regular meeting of the 11-member Arab-dominated cartel has been turned upside down by the September 11 terrorist attacks on the United States. The strikes have tilted the world economy ever closer to recession, while sending oil prices plummeting to 17-month lows because of fears of a demand slump. The 11-member organization’s own basket crude price slumped below $21 on Monday, outside the target range of $22-$28 for the first time in months.
Under a price-band mechanism, OPEC aims to keep its basket price within a $22-$28 range by cutting production by 500,000 barrels per day (bpd) if the price remains below $22 for 10 working days, or increasing by 500,000 bpd it remains above $28 for more than 20 working days. "The oil is volatile, very volatile," added the UAE minister.
Algerian OPEC president Hakib Khelil said that OPEC still wants "a $25 stable price", a target, which ministers from Kuwait, United Arab Emirates and Qatar all endorsed. Few were prepared, however to say how prices can be restored to such levels after recent falls. Khelil downplayed any long-term impact of an anticipated military retort for terrorist attacks in the United States and said that OPEC's infamous "price band mechanism" could come into play if prices persisted below $22.
Asked by reporters in Vienna whether OPEC was committed to its target of $25 a barrel, Khelil said: "As far as I know." "Why should we change what we agreed on?", he added. "If there is military action, it is quite possible that prices will go up a little bit... but I don't think the rise will be very big or will last," even "if the action is prolonged," he said, quoted from Vienna by Algerian radio.
Oil-producing cartel OPEC will not use its influence on oil output and prices against the United States and its allies, as the market goes through upheaval, the head of the organization told a French newspaper in an interview to appear Wednesday.
Asked about a promise made by OPEC the day after a wave of terror attacks on the United States on September 11, Chakib Khelil said that OPEC would stick by its vow not to suspend crude exports to Western countries "in principle." "But it's a sovereign right of each country to decide what they want to do," Khelil, who is also Algerian energy minister, said in the interview with French newspaper Liberation. Khelil said OPEC countries will never stop their supplies, insisting "we are there to satisfy the market."
The OPEC leader added that after the September 11 attacks the cartel made clear its position "which allowed oil prices to return to their average level." Without such intervention, the price of crude would have topped $40 a barrel, as it did during the 1991 Gulf War, but instead the price never spiked above $30, Khelil said.
Output cuts are viewed as politically difficult at a time when western countries are advising against any move that could send prices spiking up again, further jeopardizing global economic recovery. "For sure we would like to support the international economy," said Qatari oil minister Abdullah Bin Hamad Al-Attiyah. "But now we are seeing a big recession in the world, and for sure the recession would reflect on the demand for oil," he said.
The unhappy conjuncture of a global economic slowdown with falling oil prices gives OPEC little room for maneuver, and ministers were unusually tight-lipped in the run-up to Wednesday's gathering. With security tight following the September 11 events and the oil market situation delicate, most ministers remained closeted in bilateral talks Tuesday without offering any insight to reporters.
United Arab Emirates (UAE) Oil Minister Ubaid Bin Saif Al-Nasiri declined on Tuesday to rule out a cut in OPEC output if prices stay low, saying the cartel remains committed to a target price of $25. Arriving for a meeting on OPEC meeting, he said the ministers would study "very carefully" the latest movements on world oil markets, which slumped sharply on Monday.
"Our aim is 25 (dollars a barrel). We shall study the market and evaluate the situation very carefully," he told reporters, when asked about the sharp slump in prices in the wake of the September 11 US terror attacks. Asked if OPEC could cut production if the price remains below $22, Al-Nasiri said simply: "We shall study the market."
But according to Russian oil minister Igor Yusufov, the OPEC leadership was determined to rescue prices by keeping output stable and waiting for the "speculative" play on the market to subside. "I didn't see such pressure" to cut output, Yusufov told AFP after talks with OPEC secretary general Ali Rodriguez of Venezuela. "Tomorrow (Wednesday) you will see a decision to keep output level and restore normal prices around $25 " a barrel, said the minister from Russia, a non-OPEC oil exporter.
One way of trying to give prices a lift without formally cutting production would be for OPEC to rein in current overproduction, which some analysts believe could be nigh on one million barrels a day above the current quota of 23.3 million barrels. Few OPEC ministers would be drawn on this. "All the possibilities are there," Al-Attiyah said. "This is a very unique meeting. In two days we lost five dollars. We should discuss very carefully how to stabilize the market." ― (AFP, Vienna)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)