Posted on: Wednesday, March 16, 2005
Oil markets shrug off Saudi bid to cut prices
By Tarek Al-Issawai
Associated Press
ISFAHAN, Iran — Saudi Arabia is trying to wrestle oil prices lower with a pledge to pump more crude — with or without OPEC. But so far, it isn't working.
Hasan Sarbakhshian • Associated Press OPEC meets today amid growing concerns about how long the global economic engine can remain in high gear with crude oil prices hovering near $55 a barrel.
The original Saudi proposal, made Monday, would add 500,000 barrels, or 2 percent, to the OPEC output ceiling of 27 million a day.
But beyond sending a psychological signal of the group's readiness to respond to high prices, some analysts questioned the actual impact of such a move because OPEC members were already producing about 700,000 barrels a day above their quotas.
OPEC's president, Sheik Ahmad Fahad Al Ahmad Al Sabah of Kuwait, tried to blunt that argument by saying that any deal to formally raise production would lift actual output from about 27.7 million barrels to 28.2 million barrels a day for 10 of its members. The 11th, Iraq, is exempt from quota restrictions as it rebuilds.
Al Sabah said OPEC should not only raise output by 500,000 barrels a day today, but follow it some time in the future, if necessary, with another hike of 500,000 barrels a day.
Taking matters one step further, Saudi oil minister Ali Naimi signaled his country's willingness to raise output by itself, without OPEC approval.
"We have done that in the past in order to meet the requirements in the market," Naimi told reporters. "Uppermost in our minds is (the intention) to satisfy the demand that is out there."
Light, sweet crude for April delivery rose 10 cents to settle at $55.05 per barrel on the New York Mercantile Exchange. That's below the record Nymex settlement price of $55.17 per barrel, set twice in late October, although futures would have to surpass $90 a barrel to meet the inflation-adjusted peak set in 1980.
In London, Brent crude futures rose 19 cents to $53.85 a barrel.
Reflecting the pessimism other OPEC members have toward the Saudi proposal, Algeria's Oil Minister Chakib Khelil said: "We can do a goodwill gesture, but it doesn't mean anything in reducing prices."
Yesterday, the world's largest oil producer said it might boost supplies unilaterally to bring relief to world markets if other members of the Organization of Petroleum Exporting Countries balked at its earlier proposal to raise the cartel's output quota.
OPEC President Sheikh Ahmad Fahad Al Ahmad Al Sabah of Kuwait smoked as he met reporters yesterday. He favors one or perhaps two 500,000-barrel-a-day output increases.
