OPEC oil ministers want total compliance with production quotas
Copyright © 1999 Nando Media
Copyright © 1999 Associated Press
Gas prices surge 8 1/2 cents
By BRUCE STANLEY
VIENNA, Austria (March 22, 1999 11:00 a.m. EST
nandotimes.com) - OPEC's effort to reduce global
oil output and boost prices gained momentum Monday
when Russia announced its intention of trimming
exports by 100,000 barrels a day.
Oil-producing nations have essentially agreed to slash
total daily production by more than 2 million barrels,
Venezuelan Oil Minister Ali Rodriguez said.
"Agreement tomorrow is confirmed," Rodriguez said
here ahead of Tuesday's meeting of the Organization
of the Petroleum Exporting Countries. The meeting is
expected to result in formal approval of the production
cuts agreed upon earlier this month.
Russia, which is not an OPEC member, will reduce its
crude oil exports from April through June, in part to
help strengthen world oil prices, the Russian Fuel and
Energy Ministry announced in Moscow. Russia is one
of the world's largest oil producers at more than 6
million barrels a day. Of that total, it has been
exporting around 2.3 million barrels daily.
Russia plans to keep the cuts in place for only three
months but will review conditions at the end of June
and could extend them, said Oleg Rumyantsev, a
ministry spokesman.
Iraq Oil Minister Amer Mohammed Rasheed minced
no words in summing up the goal of OPEC ministers
meeting this week in Vienna.
"We are here ... to save the situation of the collapsing
prices of oil. That is our main objective," Rasheed said
Sunday.
Excess supply and a weak demand for winter heating
oil sent prices plunging to 12-year lows late last year.
Although consumers have benefited from cheaper oil
and gasoline, the soft market has inflicted economic
pain on producers, including Britain, Norway and the
oil-patch American states of Texas and Louisiana.
Prices finally began surging two weeks ago, when
representatives of OPEC's three biggest members -
Saudi Arabia, Iran and Venezuela - along with Algeria
and non-member Mexico agreed at a meeting in The
Hague, Netherlands, to reduce output.
On the New York Mercantile Exchange, crude oil for
April delivery has traded in the $15-range. In
comparison, crude was trading at about $12 a barrel a
month ago.
As a result, gasoline prices have risen sharply in the
United States after falling to all-time lows, when
adjusted for inflation.
The national average gas price shot up almost 8 1/2
cents a gallon in the past two weeks, reaching nearly
$1.09 a gallon on Friday, the Lundberg Survey
reported. It was the steepest and fastest rise since
Iraq invaded Kuwait in 1990.
OPEC ministers have expressed hope that
oil-exporting nations would abide by the planned
production cuts. The new quotas, which are to begin
April 1, would remain in effect for a full year,
Venezuela's Rodriguez said Sunday.
Under the deal, Saudi Arabia, which currently
produces more than 8 million barrels a day, will take
the biggest cut - 585,000 barrels. No. 2 producer Iran
will pump 264,000 fewer barrels a day, while
Rodriguez confirmed that Venezuela will trim daily
output by 125,000 barrels.
Saudi Arabian Oil Minister Ali Naimi said Sunday that
he expected full compliance with the new, lower levels
of production.
OPEC estimates the current output of its 11 members
at 27.66 million barrels a day. At this level, supply
exceeds demand by about 500,000 barrels, according
to the Paris-based International Energy Agency.
The success of OPEC's effort to buoy prices by
pumping less oil depends upon the compliance of each
member, Rodriguez said. Cheating has been a chronic
problem for the group.
Libyan Oil Minister Abdalla Salem El-Badri confirmed
that his country will pump 96,000 fewer barrels a day
beginning April 1.
"I hope that everybody will abide by the agreement,"
El-Badri said Sunday.
Officials from Nigeria, one of OPEC's poorest
members, refused Monday to say whether their
country would trim output by 148,000 barrels a day -
Nigeria's share of the production cuts agreed upon at
The Hague.
The only other OPEC member yet to confirm its share
of the planned cuts is Indonesia, which is suffering
economic turmoil and badly needs the dollars it earns
from oil sales abroad.
More ministers arrived today and delegates met in
small groups prior to Tuesday's OPEC meeting.
Along with Russia, other OPEC outsiders pledging to
reduce production include Mexico, Oman and Norway.
Members of OPEC are Algeria, Indonesia, Iran, Iraq,
Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United
Arab Emirates and Venezuela.
nandotimes.com
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The reason Nigeria and Indonesia are so desperately poor is because of the way they have been governed. Minimum intelligence is required to think these things through. If Indonesia and Nigeria believe the rest of OPEC will be willing to let them off the hook, the whole deal could come apart and they will be selling their oil at December's prices, or even lower.
Charles |
