OPEC under increasing pressure to raise oil output
By Bruce Stanley
Associated Press
LONDON — Demands for an increase in OPEC oil output intensified yesterday, as crude prices rose again despite the group's efforts to reassure markets against a possible shortfall in supply.
Senior British and European Union officials called on the Organization of Petroleum Exporting Countries, supplier of one-third of the world's oil, to increase output further or risk throttling economic growth.
"Oil now presents a real and emerging risk to the global economy," Ed Balls, chief economic adviser at Britain's Treasury, told the Foreign Press Association.
OPEC president Purnomo Yusgiantoro said earlier that the cartel is producing 25.5 million barrels a day, or 2 million barrels above its official output target. It could raise its actual production "if necessary" by up to 15 percent, or an additional 3.8 million barrels, he told reporters on the sidelines of an investment conference in London.
Purnomo was hoping to calm a market agitated by unexpectedly strong demand for crude and by fears about instability in the Middle East. U.S. oil prices have soared above $40 a barrel, and many analysts predict even higher prices when demand for gasoline rises this summer.
Although prices fell at first on Purnomo's comments, they recovered and shot higher later in the day. Contracts of light U.S. crude for June delivery were trading at $41.27 a barrel in the afternoon in New York, up 73 cents from Tuesday's close. July contracts of North Sea Brent crude were trading 70 cents higher in London, at $37.65.
"This week we will be consulting with OPEC on the recent rise in oil prices and urging them to raise oil production to meet world demand at the prices they themselves have said are sustainable," Treasury chief Gordon Brown told a House of Lords committee.
Several, if not all, of OPEC's members were expected to gather for emergency talks Saturday during an energy forum in Amsterdam, and Purnomo said he hoped they would discuss a Saudi proposal for OPEC to raise its output target by 1.5 million barrels. Saudi Arabia is the only group member with significant additional capacity.
The European Union's energy commissioner, Loyola de Palacio, told reporters in Brussels that OPEC risks losing credibility if it refuses to increase output during these talks.
However, Purnomo said that any agreement to change the OPEC target would require the approval of all the group's members, and an official at OPEC's headquarters in Vienna said some members might not attend the Amsterdam talks. Regardless of what happens this weekend, a formal decision would have to wait until all of the cartel's 11 members meet June 3 in Beirut, the OPEC official said, speaking on condition of anonymity.
Analysts say an increase in OPEC's production target would reduce prices only if it meant the group was adding real barrels to the market. They argue that a modest increase in the target might just change output on paper, by legitimizing some of the oil OPEC is producing above its current target.
White House spokesman Scott McClellan said Tuesday that U.S. Energy Secretary Spencer Abraham would meet with key oil producers, but he didn't specify when.
