OPEC To Boost Oil Production
Wednesday, June 21st 2000, 12:00 am
By: News On 6
VIENNA, Austria (AP) â€” OPEC members agreed informally Wednesday to boost daily crude oil production starting in July, according to the oil minister of Saudi Arabia, the group's biggest producer.
The Saudi official, Ali Naimi, declined to give details about the size of the planned increase. But another senior OPEC source, speaking on condition of anonymity, said OPEC ministers have agreed to hike output by 700,000 barrels a day.
Many analysts expect OPEC to boost its daily quota by at least half a million barrels â€” a move that hasn't impressed the markets, where U.S. prices soared to a 3 1/2 -month high Tuesday.
Oil ministers from the Organization of Petroleum Exporting Countries ended four hours of informal discussions Wednesday in Vienna, Austria, ahead of a formal session later in the day.
Naimi spoke as he left the hotel where the discussions took place. Indonesian oil minister Susilo Bambang Yudhoyono confirmed that the group has reached a deal but also declined to give any specifics.
An increase of 500,000 barrels daily would not significantly add to the flow of crude to the market because it would equal roughly the amount of crude that OPEC's 11 members are already pumping in excess of their official quotas.
Analysts said that a hike of this size â€” the equivalent of 2 percent of OPEC's declared output â€” would do little to dampen current high prices for crude and gasoline.
The August contract for West Texas Intermediate, the U.S. benchmark crude, was up 35 cents a barrel in early trading Wednesday at $31 on the New York Mercantile Exchange. In its final day of trading Tuesday, the July contract for West Texas Intermediate closed at $33.05 after trading as high as $33.40, its highest level since March 8.
Some OPEC sources have estimated that OPEC might increase output by as much as 1 million barrels a day.
Leo Drollas, chief economist of the Center for Global Energy Studies in London, noted that only Saudi Arabia, Kuwait and the United Arab Emirates have enough spare capacity to pump large amounts of new oil.
``The problem is that some of these countries won't be able to meet a target of 1 million barrels ... at the moment,'' he said. ``But take two or three months, and they will.''
Roger Diwan, an analyst at The Petroleum Finance Company, a consultancy based in Washington, predicted that OPEC would add no more than 800,000 barrels to its current quota.
An increase of that size could ``remove some of the sting'' to oil importing nations, causing U.S. oil prices, for example, to drop to between $27 and $28 per barrel, he said.
The ministers are meeting at a time when pressure is building in the United States for relief from sharply rising gasoline prices. The national average price of regular unleaded gas was $1.681 this week, up from $1.631 a week ago and $1.42 on May 1, according to the U.S. Department of Energy.
``I think the U.S. gas prices are going to continue to go up this summer,'' said Falah Aljibury, an industry consultant based in Alamo, Calif.
American refineries already are producing almost all the gasoline they can, and U.S. gas inventories are at their lowest levels in several years, he said. By the time ships containing fresh Middle Eastern crude reach U.S. ports, the summer driving season will be almost over.
OPEC pumps about 35 percent of the world's oil. Key non-OPEC producers such as Mexico have cooperated with the cartel, agreeing in March, for example, to boost their output in line with OPEC.
Under pressure from the United States, nine OPEC members agreed in March to raise output in a successful effort to trim crude prices, which had almost tripled over the previous year.
The March agreement excluded Iraq, which never was part of the production cuts last year that sent prices surging. Iran participated unofficially in that increase although it refused to sign the formal agreement out of anger at what it saw as heavy-handed U.S. intervention.
Saudi Arabia and Iran, OPEC's No. 2 producer, cleared a potential hurdle to a consensus on Tuesday by forging what Iranian oil minister Bijan Namdar Zangeneh described as a ``common position'' on whether and by how much to boost the group's output.
Zangeneh told reporters at the time that Iran would participate in a production increase if other OPEC members agree on one.
``We won't lose our market share,'' he said.
Iraq, meanwhile, urged oil producers not to feel pressured to boost production, even as its own output has been on the rise.
``Iraq will not accept any increase in oil production during the OPEC meeting under any pressure,'' Oil Minister Amer Mohammed Rashid was quoted as saying Wednesday in the Iraqi al-Thawra daily. Rashid sent a subordinate to the OPEC meeting.
Although its oil industry has been crippled by war and U.N. sanctions, Iraq is pumping as much as possible to raise badly needed cash. It has set a daily export target of 3.3 million barrels by the end of the year, up from its current 3.1 million barrels a day.