OPEC Flummoxed in Face of Oil Price Slump
By Richard Mably and Tom Ashby
VIENNA (Reuters) - OPEC on Monday was left powerless to respond to a collapse on world crude markets that could signal the end of an oil price boom engineered by the cartel over the past two years.
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Having assured the West of stable supplies in the wake of the suicide attacks on the United States, OPEC ministers arriving for Wednesday's are bystanders as crude threatens to breach the lower end of their $22-$28 target.
``It's a very delicate time at the moment but we're all working to maintain price stability,'' OPEC Secretary-General Ali Rodriguez told Reuters from OPEC headquarters in Vienna.
London Brent crude futures in early afternoon trade had slumped $2.20 to $23.24 a barrel, valuing OPEC crude below the bottom end of its $22-$28 target.
Brent has fallen 15 percent, from $27.45 a barrel prior to the attacks, as dealers adjust to the threat of recession and chances appear to recede of a U.S. military retaliation that might disrupt Middle East oil supplies.
The Organization of the Petroleum Exporting Countries is facing the harsh realities of an economic downturn among the world's industrialized powers that seems certain to stem demand for its exports.
``The signs for the global economy are not at all encouraging,'' said Rodriguez.
``OPEC's position has weakened significantly, even for trying to defend $22 oil,'' said Nauman Barakat of ABN Amro bank in New York. ``Prices could be heading back toward the long-term norm of $18 for Brent and $20 for U.S. crude.''
U.S. demands for cooperation in the wake of the attacks make it nigh on impossible for OPEC's most influential member, Saudi Arabia, to support any early action to prop up prices.
Riyadh has pledged full support to help provide intelligence to Washington on Saudi-born Osama bin Laden, suspected mastermind behind the assaults.
U.S. TOTTERS
Saudi Oil Minister Ali al-Naimi said last week that the group will continue to defend $25 crude.
But a tottering U.S. economy and Washington's request for help in a crisis means OPEC will find it difficult this week to extend its strategy of rapid, regular supply cuts to keep the heat under oil prices.
The group has cut production three times this year, just recently lopping of a million barrels daily to take limits for 10 in OPEC with quotas, excluding sanctions-bound Iraq, to 23.2 million bpd.
OPEC this week appears to have no choice but to leave that policy in place and call for tighter adherence with existing output quotas.
Left with high volumes of spare capacity, member countries have found it difficult to resist leaking extra supplies to a market that in the immediate aftermath of the U.S. attacks feared for security of supplies.
Early estimates by consultants who monitor OPEC supply are that the OPEC 10 is leaking some 1.3-1.4 million bpd in excess of official quotas in September, compared to oversupply of about 900,000 bpd in August.
``They're only about half way to cutting the million in September and of course they were already leaking close to a million in August,'' said one leading consultant who tracks OPEC exports.
The monitors said that the September 11 attacks, which initially sent oil prices spiralling, appeared to have encouraged producers to put unscheduled cargoes on the water in the last week or two.
State Saudi shipper Vela ordered three supertankers to carry nine million barrels to the U.S. Gulf in the immediate wake of the attacks.
``Only two countries are really complying, Venezuela by design and Indonesia by default,'' said one monitor. |
