Venezuelan Oil Minister Alvaro Silva said on April 3rd that OPEC would activate its price band mechanism and cut crude production again if oil prices continue to fall.
Silva said that: “OPEC has already outlined its strategy until June: if there is a fall below $22 [a barrel], after 10 days there will be a cut of 500,000 b/d and that is automatic.”
OPEC members had agreed in March to slash production by 1 million b/d from April 1st in the group’s second output reduction of the year. Silva cautioned that any new production decision would be taken after careful study of the markets.
“We have only had two days since the cut took effect, so let’s give the market time to react … it would seem to be hasty to announce another measure,” Silva said.
He added that: “Prices were falling and would have fallen much further, but they stopped when we announced the cut and now they are in the band.”
The price of OPEC’s reference basket of cruds fell to $22.53 a barrel on April 2nd, the first trading day since the new output levels took effect.
The basket price has averaged $24.36 a barrel in 2001, compared with $27.60 a barrel in 2000 and $17.47 a barrel in 1999. In February, the basket price averaged $25.41 a barrel, compared with $24.06 a barrel in January and $24.13 a barrel in December.
© 2001 Mena Report (www.menareport.com)