OPEC Agrees To Boost Oil Output
Sunday, September 10th 2000, 12:00 am
By: News On 6
VIENNA, Austria (AP) â€” OPEC members agreed Sunday to boost the group's official output of crude oil by 800,000 barrels a day, two oil ministers in the petroleum producers' cartel said.
The decision, reached after four hours of informal talks in Vienna, came amid mounting international pressure on the Organization of Petroleum Exporting Countries to pump more oil to stem surging fuel prices.
The new quota, which will be roughly in line with what many analysts had predicted, will take effect Oct. 1. OPEC members agreed to meet again Nov. 12 to reassess market conditions.
Algerian Oil Minister Chakib Khelil and Qatar Oil Minister Abdullah bin Hamad Al Attiyah confirmed the increase, which adds 800,000 barrels, or 3 percent, to OPEC's current official production of 25.4 million barrels a day.
Yet the production increase will provide no more than 100,000 fresh barrels of oil to world markets because OPEC members already are producing at least 700,000 barrels above their current quotas, analysts said.
In Washington, the Clinton administration gave Saudi Arabia credit for the OPEC production increase but said it is too early to know what effect it will have on the world oil shortage.
``I think we've got to digest what they've done today,'' John Podesta, the White House chief of staff, said on ``Fox News Sunday.'' ``We're short on oil and have been pushing for increased production. I think this substantial increase was led by Saudi Arabia.''
The OPEC ministers began informal talks early Sunday ahead of a formal meeting scheduled later in the day.
High fuel costs have sparked concern and even outrage in several consuming nations. French truckers and taxi drivers last week blocked roads to protest gasoline prices, while farmers in Britain mounted similar, if smaller efforts to disrupt traffic. Americans living in areas where there is heavy snowfall worry that low fuel inventories will lead to soaring prices to heat their homes this winter.
On a diplomatic level, European finance ministers expressed concern that surging prices could crimp world economic growth, and they discussed taking the exceptional step of sending an envoy to the OPEC meeting in Vienna to ask for an increase in output.
Finance ministers from 21 Pacific Rim countries, meanwhile, had warned that rising oil prices could damage their economies. Officials attending the Asia-Pacific Economic Cooperation forum in Brunei issued a statement Sunday urging OPEC members to stabilize oil prices.
``We did all that we could, but we cannot solve the whole problem,'' Attiyah, the Qatar oil minister, told reporters.
He said the heavy taxes levied on fuel in many oil-importing nations are partly to blame for current high prices, and he urged governments of such countries to work ``very hard'' to trim them.
``If they reduce the tax, I believe we will find a very stable price,'' he said.
However, the size of the increase offers scant comfort for Americans who depend on heating oil to warm their homes this winter, analysts said.
``This agreement is doing nothing for U.S. consumers, nor could it have been expected to given the tightness in the home heating oil market in the U.S. and the refineries' lack of capacity,'' said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.
Refineries are working almost flat out to produce heating oil already, he said, and it will take at least 45 days before any new barrels of crude can reach consumers in the form of heating oil.
For Americans living in the Snow Belt, Houston-based analyst Bill Edwards offered this advice for coping with cold winter weather: ``Chop wood.''
Crude prices fell Friday in anticipation of an increase by OPEC, which produces about a third of the world's oil.
Futures contracts dropped $1.76 to $33.63 a barrel on the New York Mercantile Exchange, putting an end to a surge that had seen prices vault 30 percent since Aug. 1. In London on the International Petroleum Exchange, October Brent crude from the North Sea fell $1.77 to $32.78 a barrel.
Saudi Arabia, OPEC's largest producer and exporter, will provide the biggest share of the new quota increase.
The Saudis were believed to have pushed for an even bigger increase, but many OPEC members, including Iran and Venezuela, are constrained by a lack of spare capacity and had indicated a preference for a more modest rise in production.