OPEC Pres: Will Assure US Oil Price Won't Hurt Economy
DOW JONES NEWSWIRES
By David Bird
Of DOW JONES NEWSWIRES
NEW YORK -- OPEC's president said Sunday he will assure the Bush administration that the latest output cut by the oil exporters' group won't harm the U.S. economy.
In a telephone interview from Detroit, Mich., where he's attending and Arab-American business conference, Abdullah bin Hamad al-Attiyah told Dow Jones Newswires that U.S. officials needn't worry about rising oil prices disrupting the economy.
Attiyah, who is also oil minister of Qatar, said he plans to meet Monday with U.S. Energy Secretary Spencer Abraham on the sidelines of the conference.
Oil prices jumped last Wednesday after the Organization of Petroleum Exporting Countries announced in Vienna it would cut its oil output ceiling by 900,000 barrels a day, to 24.5 million barrels a day, beginning Nov. 1.
Many OPEC ministers headed into the talks saying they favored unchanged output, but concerns over a potential rise in global inventories this winter - when stocks usually fall - led ministers to their surprise, earlier-than-expected decision.
More Cuts In December?
OPEC decided to meet again Dec. 4 and said it could introduce further cuts, or boost output, depending on the price and supply/demand outlook then.
Asked about the OPEC move, U.S. President George W. Bush said Thursday, "My reaction is that I would hope our friends in OPEC don't do things that would hurt our economy."
A White House spokesman earlier had said it is in the interest of oil-producing and consuming nations to see that energy supplies are "abundant and adequate."
OPEC said it took the preemptive, pre-winter decision to keep prices close to the midpoint of its $22-$28 price target for its reference basket of crudes. U.S. benchmark West Texas Intermediate crude trades about $2 a barrel above the OPEC reference price.
Told of Bush's comments, Attiyah said Sunday, "For sure, I will confirm to him that our interest is not to harm the economy of the U.S.
"All of us in OPEC believe that if the American economy is healthy, we are healthy, too."
Attiyah repeated comments from Vienna that OPEC would seek assurances from key non-OPEC countries - such as Russia, Mexico and Norway - that they will reduce oil supplies when needed to keep prices steady.
Oil market analysts - including OPEC's own projections - show that the group will lose market share in 2004, as non-OPEC production is expected to grow at more than the rate of increase in global petroleum demand.
No More Cuts Without Non-OPEC
Attiyah has said that OPEC's next output cut, if needed, would have to come in combination with non-OPEC cuts. He said he believes that OPEC wouldn't be willing to cut its output ceiling to below 24 million b/d without non-OPEC contributions.
But Attiyah said the group is focused now on steadying the OPEC basket price near $25, rather than aggressively defending its potentially shrinking one-third share of the global oil market.
"We are not now talking about market share," he said, referring to the inevitable price war that would develop if OPEC refused to cut output and instead sought to defend its share of the market.
"We will be looking for help, or, it's better to say, cooperation (from non-OPEC) at the right time," he said.
In response to OPEC's move, Norway said it isn't interested in cutting supplies now, saying that prices near $25 for its oil are acceptable. Mexico said it intends to keep oil exports steady in 2004 at the 2003 level of 1.88 million barrels a day, and won't cut production.
Russian President Vladimir Putin was quoted as saying in New York on Friday, before a summit with Bush, that his government may curb crude-oil exports if world oil-market prices fall to a level it considers "unfair," the Interfax news agency reported. Putin didn't indicate what price would be "unfair" for Russian crude, now trading close to $26 a barrel.
"The government has instruments in its hands, and with the help of these instruments we can regulate the shipments of oil to world markets," Putin said.
"If we see that the oil price has dropped to a level we consider 'unfair,' we will use these instruments," he said.
In the past, Russia, Norway, Mexico and others have pledged to assist OPEC's efforts to stabilize prices by restraining supplies, but only after prices dropped sharply. The last time, in late 2001, OPEC pledged to cut output by 1.5 million b/d if non-OPEC producers cut by 500,000 b/d. The price of U.S. crude-oil futures dropped to near $17.50 before cuts were finally agreed. The deal put a floor in the market at $20 before prices rose further, to average over $26 for the year.
But for now, Russia's oil production is expected to surge next year, as private companies now run the operations. According to International Energy Agency, the West's energy watchdog, Russia's oil output is projected to top Saudi Arabia in 2004, at 8.91 million barrels a day, up from 8.42 million barrels a day. The 2004 figure represents a jump of more than 16% since 2002.
Putin's Hands On The Pipelines
But the Russian government still controls the crucial export pipeline network, giving it the potential upper hand in restraining supplies to the world market, if it chooses to do so.
In Moscow on Saturday, Mikhail Khodorkovsky, chief executive of OAO Yukos (R.YUK), Russia's largest oil producer, said Russian oil output could drop by 1 million b/d if prices on the world market plunge.
He said such a "substantial drop" could "happen independently of government intervention."
Attiyah said in the interview that the non-OPEC producers say that they won't cut supplies "if the price is OK, but there are no guarantees what will happen" if they don't show willingness to support prices.
-By David Bird, Dow Jones Newswires, 1-201-938-4423; david.bird@dowjones.com |
