OPEC agrees to keep pumping oil at current rates despite plunge in crude prices, demand
Friday, September 28th 2001, 12:00 am
By: News On 6
VIENNA, Austria (AP) _ Saying it wanted to keep oil affordable for a world economy stumbling toward the brink of recession, OPEC has agreed to continue pumping crude oil at current levels.
The Organization of Petroleum Exporting Countries announced Thursday it would not change its official volume of production in spite of the plunge crude prices have taken since the Sept. 11 terror attacks on the United States.
Although less expensive crude has already translated into cheaper gasoline and heating oil, the savings for consumers is largely offset by the costs of the worsening slowdown in global economic activity. And the confidence of consumers and investors _ a bellwether of economic vitality _ depends on a lot more than simply the expense of driving a car or heating a house.
``Sure, lower oil prices help. But they don't necessarily mean the customer will be back in force and that investment will be where it needs to be to get the economy back on track,'' said energy analyst Yasser Elguindi of Medley Global Advisors, a New York consultancy.
In fact, several OPEC delegates meeting at the group's headquarters in Vienna, Austria, argued that current oil prices were too low, and representatives of the group's 11 member nations planned to gather again on Nov. 14 to reassess market conditions. They said they would cut output then if necessary.
Oil prices spiked to $31 a barrel after the attacks on New York and Washington but have tumbled since then. The OPEC benchmark price stood at $20.11 on Wednesday, the most recent day for which the information was compiled.
``We still have as a target to stabilize prices between $22 and $28'' a barrel, OPEC President Chakib Khelil said at a news conference. He said the group would use ``any measures'' to try to defend that target.
OPEC delegates had the unwelcome task of searching for a consensus at a time of economic _ and political _ uncertainty. The world is fearful about the possible side-effects of U.S.-led military action against Afghanistan's Taliban regime and the forces loyal to Osama bin Laden, the prime suspect in the terror attacks.
OPEC's official output target is 23.2 million barrels a day. The group supplies almost 40 percent of the world's oil, including overproduction estimated at between 700,000 and 1.5 million barrels a day.
It has cut back its official production three times this year already, most recently by 1 million barrels a day on Sept. 1.
By holding their official production steady for now, OPEC members hope to earn merit with the United States and other major importers while also giving oil markets time to digest their most recent production cut.
``They can appear to be a moderate force in these troubled economic times and come back and review it later,'' said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London.
Gignoux described OPEC's agreement as ``absolutely'' good news for consumers. He noted that U.S. prices for home heating oil plunged from 85.75 cents a gallon on Sept. 14, the first trading day after the attacks, to a low on Wednesday of 60.70 cents.
However, OPEC did not rule out curtailing output before its November meeting if prices remain unacceptably low.
Under an existing arrangement, OPEC members have agreed ahead of time to cut their combined daily production by 500,000 barrels if their benchmark price for crude falls below $22 a barrel for 10 consecutive trading days. As of Wednesday, the OPEC benchmark price had been below $22 for three consecutive days.
OPEC delegates refused to say whether they would enact such an automatic cut, and several said they believed the recent slide in prices would be temporary.
``Prices will, in the coming weeks, return _ I am sure _ to an acceptable level,'' OPEC Secretary-General Ali Rodriguez told reporters.
On Thursday, November contracts of North Sea Brent crude slipped 10 cents to $22.90 a barrel in trading on the International Petroleum Exchange in London. Contracts of light, sweet crude for November delivery moved higher on the New York Mercantile Exchange, up 36 cents to $22.74 a barrel.
Still, Kuwaiti Oil Minister Adel al-Subeih said he would not be concerned if the price stayed at or even slightly below $22 a barrel. ``We would be satisfied with that,'' he said.
OPEC's meeting took place amid unusually tight security in the wake of the Sept. 11 terror attacks. Police dogs had earlier prowled the building sniffing for bombs, and extra police armed with assault rifles patrolled outside the building.
Khelil, speaking to his fellow delegates at the start of the meeting, extended OPEC's condolences to the families of the victims of the attacks, before saying that the attacks would have a ``profound'' impact on global demand for oil.