OPEC lifts output to halt price jump
BILL JAMIESON AND JOHN BOWKER MEMBERS of the OPEC oil cartel agreed yesterday to boost their oil production target by 6.5 per cent to 24.5 million barrels per day to prevent oil prices soaring out of control and plunging the world into recession.
The Organisation of Petroleum Exporting Countries announced the increase at an emergency meeting in Vienna yesterday, in the hope of calming fears of a supply crunch caused by the continuing strike in Venezuela and looming war in the Middle East. The increase will take effect on 1 February. The Venezuela strike, launched early last month by political opponents seeking to oust President Hugo Chavez, has slashed the country’s exports by about two million barrels per day. Venezuela is normally OPEC’s third largest producer and a major oil supplier to the US.
OPEC’s president, Abdullah bin Hamad Al Attiyah, is trying to send a very strong message that it will do its utmost to stabilise demand and supply. OPEC pumps about one-third of the world’s crude supplies, which total 79 million barrels per day.
Leading cartel producer Saudi Arabia, in control of most of the world’s spare capacity, said it was already pumping more to fill the two million barrels-per-day hole in markets. Riyadh is trying to prevent oil prices soaring to heights that might harm already fragile world economic growth.
US oil prices recently rose above $33 per barrel for the first time in two years. It was valued at $31.58 on Friday.
With no end in sight to the Venezuela strike, Ali Rodriguez, president of state Petroleos de Venezuela, blamed sabotage at oil fields and refineries for the prevention of a swift return to production.
MEANWHILE, North Sea oil and gas giant BP is expected to announce early this week that some of its underperforming assets will be put up for sale.
The move will kickstart a radical review of the firm’s core business, as promised to investors by chief executive John Browne following three production growth forecast downgrades in as many months. A BP spokeswoman said details would be revealed at the group’s official strategy review on 11 February.
She confirmed that the energy giant was looking to streamline its exploration and production business, which accounts for 80 per cent of operating profits. And she added that "the sooner we know how that will happen, the better".
Assets to be put up for sale are expected to come from the North Sea and the US as well as South America. BP said it would be reviewing the sector after November’s growth forecast downgrade.