VIENNA, Austria (AP)--OPEC will cut its production target by 4 percent as scheduled, several oil ministers said Wednesday--a move that analysts say could drive crude oil prices higher even as U.S. customers are already facing high gasoline prices.
The Organization of Petroleum Exporting Countries, which pumps about a third of the world's oil, will reduce its output ceiling by 1 million barrels per day.
A recent surge in oil prices had led some of the group's 11 members to suggest postponing the cut, but OPEC's most influential oil minister, Saudi Arabia's Ali Naimi, prevailed in his effort to press ahead.
The rise in crude prices has seen gasoline prices climb to record levels in the United States. The nationwide averaged rose to $1.80 a gallon, according to the latest Lundberg survey of 8,000 stations across the United States.
Kuwaiti Oil Minister Ahmad Fahad Al-Ahmad Al-Sabah had earlier suggested delaying the cut but was among those who confirmed the group's decision to trim its target to 23.5 million barrels per day starting Thursday.
Ministers from Algeria, Nigeria, Libya and Qatar also confirmed the agreement, which the representatives reached in private talks ahead of a formal meeting at OPEC's headquarters in Vienna.
OPEC had agreed last month in Algiers, Algeria, to make the cut on April 1, but recent discomfort with rising prices in the United States and other importing countries had led some OPEC members to reconsider.
``We made decision to apply the Algiers decision. We're going to meet again in June ... and at that time we're going to review the market,'' Algerian Oil Minister Chakib Khelil told reporters.
OPEC was forced to balance consumers' desire for lower oil prices with its own fears that swelling inventories and a seasonal lull in springtime demand could cause prices to plunge.
Most OPEC members are taking advantage of the current high prices by pumping as much oil as they can. Excluding Iraq, which doesn't participate in the group's quota agreements, OPEC is already exceeding its target by an estimated 1.5 million barrels.
If individual members have the discipline to reduce their actual output in line with their lower target, crude prices now could reach $40 per barrel, said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.
That could damage the global economy and the long-term demand for oil, other analysts have warned.
U.S. light, sweet crude reached a 13-year peak of $38.35 per barrel on March 17. Traders had anticipated that OPEC would stick with its planned cut, and U.S. crude futures for May delivery fell 22 cents to $36.03 per barrel in New York. In London, May contracts of North Sea Brent were 9 cents higher at $32.54 per barrel.
In the United States, the high oil and gasoline prices have become an issue in the presidential campaign.
Democratic contender Sen. John Kerry said that as president he would stop pumping oil into the nation's emergency stockpile until prices fell and would pressure OPEC to provide more oil. A spokesman for President Bush blamed high prices on the failure of Congress to approve Bush's energy proposals in 2001, and the Bush campaign started an ad accusing Kerry of favoring higher gasoline taxes.
EDIT: I didn't initially realize how responsive the Kerry campaign was. Grimis' AP article about OPEC's announcement was posted at 8:50 am CST. Kerry's response blaming it on Bush was posted at 9:10 am CST. Not bad!
#3 Posted on 31.3.04 1112.51 Reposted on: 31.3.11 1120.47
In a way I hope they cut it even more. This will back fire on them big time long-term. If nothing else, maybe we will be prodded to work on fuel efficiency. Dependence on foreign oil is as much a threat to our security as the terrorists.
Remeber, the Saudi's are our allies. OPEC knows the target range to maxmize profits wihtout it biting them in the butt. However, the weak dollar seems to be fueling (pun intended) their greed.
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