OPEC shooting for $25.
Opec's target - $25 per
barrel
Ministers from Saudi Arabia, Venezuela and Mexico promised
to bring down prices
The price for crude oil should stabilise at about $25 per
barrel, according to Rilwanu Lukman, the outgoing
secretary-general of the Organisation of Petroleum
Exporting Countries (Opec).
A barrel of Brent crude oil - the market's benchmark -
currently sells at just under $30 - its highest level for
nearly 10 years. One year ago it cost as little as $10.
In a BBC interview Mr
Lukman said recent
production cuts had pushed
up oil prices too much. He
argued that it would be in
the interest of both
producers and consumers to
stabilise the price at a
"correct level".
"We don't want prices to
see-saw," he said.
At the next official Opec
meeting on 27 March
ministers are expected to agree on a small increase in
production quotas, which could nudge down prices.
$60bn loss
According to Mr Lukman, the slump in oil prices one
year ago cost oil producing countries between $50-60bn
in revenue.
Since then production cuts have pushed up prices, but
Opec's figurehead points out that they are not
unusually high.
"Three to four years ago prices were at $25, $26 a
barrel before they came down precipitously to $10 a
barrel," Mr Lukman said.
On Thursday, ministers from three major oil producing
countries agreed to increase production, but failed to
give a firm committment to do so significantly and
quickly.
Venezuela, Mexico and Saudi Arabia said that "an
increase in production is warranted", in the words of
Mexican oil minister Luis Tellez.
"We recognise that there is a need for additional
production," added Saudi Arabian oil minister Ali
al-Nuaimi.
Saudi Arabia, the world's largest oil producer, will
present the recommendations of the meeting to fellow
Opec members.
Opec produces 30% of the
world's oil. After holding the
world to ransom in the
1970s with punishing
production cuts and price
increases, the organisation
failed to present a common
front during the 1980s and
1990s.
Only now have oil producers
finally managed to agree
and keep to production
quotas once again.
It is believed that the
ministers will recommend
that Opec increases
production by 1.2 million
barrels per day (bpd) from April, reversing some of the
4.3m bpd cuts made since 1998.
But supply is so squeezed that even this increase might
not be enough to ease prices.
Peter Gignoux, analyst with Salomon Smith Barney,
said: "This market needs to see real barrels, not
promises. That's what's going to bring prices down."
US pressure on prices
Oil producers - both members and non-members of
Opec - have come under intense pressure from the
United States to bring down prices.
On Thursday President Bill Clinton promised US
legislators that he would release oil from the national
emergency stockpiles to force down prices, if Opec did
not agree to increase its production.
One congressman recently introduced legislation that
would bar military assistance to any oil-exporting
country involved in price manipulation.
Major oil producers like Kuwait and Saudi Arabia depend
on military support from the United States. |
