OPEC Oil Ministers Opt to Maintain Present Output Levels Because of Weak Global Economies.
Shrugging off calls to pump more oil, OPEC ministers decided to keep output at present levels at their meeting Friday out of fear that a softening global economy will translate into weakened demand.
Any decision by the Organization of Petroleum Exporting Countries to produce more oil would have acted as a shot in the arm for countries struggling with weak growth, the fallout from the U.S. subprime crisis and negative economic factors.
But worries of a tighter market ahead for OPEC crude prompted the meeting to maintain the status quo -- and by extension keep prices around the $90 mark. "In view of the current situation, coupled with the projected economic slowdown, the conference decided that current production is sufficient to meet ... demand for the first quarter of the year," said a statement summarizing the meeting.
Friday's special meeting was set in December after prices flirted with the $100-a-barrel level to give the 13-nation organization a chance to step in and increase output in case volatile markets needed calming.
But with oil high but steady, the focus has instead shifted to the sputtering U.S. economy with its implication of lessened demand. That and a continued weak dollar, which hurts the purchasing power of OPEC members, has swung sentiment behind maintaining current output.
OPEC nations argue that market speculation and geopolitical factors are the key drivers of oil prices. They assert that increasing production beyond the present level of nearly 30 million barrels a day for the 12 members under quotas would be counterproductive because there is enough crude to meet world needs.
Focusing on the main OPEC concern -- a softening of demand -- OPEC President Chakib Khelil, repeated the group's stance that supplies were not at risk. "The world should not be concerned about the lack of oil," he told reporters after the meeting. "We are more concerned about the economic crisis and ... its ramifications and impact in the world economy."
That argument was given at least short-term weight by the latest weekly inventory report from the U.S. Energy Department's Energy Information Administration. It said Wednesday that crude and gasoline stocks rose 3.6 million barrels each during the week ended Jan. 25.
As the meeting began, oil prices fell amid worries of a possible U.S. recession. Light, sweet crude for March delivery lost 72 cents to $91.03 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
The economic concerns were renewed after the U.S. Commerce Department reported Thursday that consumer spending rose in December by 0.2 percent, the weakest performance since June. Claims for unemployment benefits in the United States jumped by 69,000 last week, the Labor Department said, more than three times what economists expected.
While most economies appear to have factored in present prices, natural catastrophes, a spike in Middle East tensions or another emergency feeding fears of a crimp in supplies could again drive prices beyond the $100 a barrel, as they did early this year.
That, in turn, could ultimately achieve the aim of the United States and other major consumers and drive down the cost of oil -- but only because their failing economies would not be able to afford to pay for pricey crude.
Qatar's Abdullah bin Hamad Al Attiyah addressed that possibility before the start of Friday's meeting. Looking ahead to the next OPEC ministerial gathering on March 5, he said "all the possibilities are there" -- shorthand for a possible cut in production, if the U.S. economy weakens enough to cut into demand.
Including Iraq, which is not under quotas, total OPEC output is estimated at about 31.5 million barrels a day -- about 40 percent of daily world demand, which is believed to be around 85.5 million barrels.
Shrugging off calls to pump more oil, OPEC ministers decided to keep output at present levels at their meeting Friday out of fear that a softening global economy will translate into weakened demand.
Any decision by the Organization of Petroleum Exporting Countries to produce more oil would have acted as a shot in the arm for countries struggling with weak growth, the fallout from the U.S. subprime crisis and negative economic factors.
But worries of a tighter market ahead for OPEC crude prompted the meeting to maintain the status quo -- and by extension keep prices around the $90 mark. "In view of the current situation, coupled with the projected economic slowdown, the conference decided that current production is sufficient to meet ... demand for the first quarter of the year," said a statement summarizing the meeting.
Friday's special meeting was set in December after prices flirted with the $100-a-barrel level to give the 13-nation organization a chance to step in and increase output in case volatile markets needed calming.
But with oil high but steady, the focus has instead shifted to the sputtering U.S. economy with its implication of lessened demand. That and a continued weak dollar, which hurts the purchasing power of OPEC members, has swung sentiment behind maintaining current output.
OPEC nations argue that market speculation and geopolitical factors are the key drivers of oil prices. They assert that increasing production beyond the present level of nearly 30 million barrels a day for the 12 members under quotas would be counterproductive because there is enough crude to meet world needs.
Focusing on the main OPEC concern -- a softening of demand -- OPEC President Chakib Khelil, repeated the group's stance that supplies were not at risk. "The world should not be concerned about the lack of oil," he told reporters after the meeting. "We are more concerned about the economic crisis and ... its ramifications and impact in the world economy."
That argument was given at least short-term weight by the latest weekly inventory report from the U.S. Energy Department's Energy Information Administration. It said Wednesday that crude and gasoline stocks rose 3.6 million barrels each during the week ended Jan. 25.
As the meeting began, oil prices fell amid worries of a possible U.S. recession. Light, sweet crude for March delivery lost 72 cents to $91.03 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
The economic concerns were renewed after the U.S. Commerce Department reported Thursday that consumer spending rose in December by 0.2 percent, the weakest performance since June. Claims for unemployment benefits in the United States jumped by 69,000 last week, the Labor Department said, more than three times what economists expected.
While most economies appear to have factored in present prices, natural catastrophes, a spike in Middle East tensions or another emergency feeding fears of a crimp in supplies could again drive prices beyond the $100 a barrel, as they did early this year.
That, in turn, could ultimately achieve the aim of the United States and other major consumers and drive down the cost of oil -- but only because their failing economies would not be able to afford to pay for pricey crude.
Qatar's Abdullah bin Hamad Al Attiyah addressed that possibility before the start of Friday's meeting. Looking ahead to the next OPEC ministerial gathering on March 5, he said "all the possibilities are there" -- shorthand for a possible cut in production, if the U.S. economy weakens enough to cut into demand.
Including Iraq, which is not under quotas, total OPEC output is estimated at about 31.5 million barrels a day -- about 40 percent of daily world demand, which is believed to be around 85.5 million barrels.
No comments:
Post a Comment