OPEC maintains current oil production quotas

ogj.pennnet.com By an OGJ correspondent

VIENNA, Mar. 11 -- Members of the Organization of Petroleum Exporting Countries agreed Tuesday to maintain their current oil production quotas, ruling out any formal or informal increase in output as a means of calming rattled markets.

Earlier suggestions that OPEC might suspend output quotas altogether were not even discussed during the meeting, said OPEC Pres. Abdullah bin Hamad Al Attiyah.

The decision to keep existing output quotas had been anticipated by some financial analysts. Jefferies & Co. Inc. in New York said Monday, "We expect the cartel to maintain the current production quota of 24.5 million b/d for the OPEC-10 (excluding Iraq) and (to) state that the members will boost production in an effort to replace lost production if Iraqi oil production stops."

At the close of the 1-day meeting, Al Attiyah said OPEC remains prepared to increase production if necessary.

Speaking at a press conference following the 2.5 hr meeting of ministers, Al Attiyah acknowledged that world oil prices are high, saying that stemmed from speculators and not from any shortage of oil supplies.

"We speak to our customers all the time, and they have not expressed any shortage to us," he said, adding that the organization is closely monitoring market supply and demand.

As added assurance, he said, OPEC ministers will meet June 11 in Doha, Qatar, to reassess the situation. Meanwhile, he said, members would confer on a regular basis or could easily meet again before that date, if necessary.

"I think we are still efficient. It took just 3 days to convene our last extraordinary meeting in February," said Al Attiyah.

His upbeat attitude was in marked contrast to a statement issued before the meeting in which he said that OPEC was not in a position to control the world oil price. "The international political tensions have, without any doubt, reduced OPEC's influence on prices," Al Attiyah said. But he insisted, "We can still have an impact on the market."

He said member ministers would carefully review the market and would decide what measures to adopt "in the interests or order and stability." But he warned that the review would be "more complicated than usual because the near-term outlook is dominated by political factors over which OPEC has no control."

The average price for OPEC's basket of seven benchmark crudes lost 68¢ to $33.11/bbl Monday (OGJ Online, Mar. 11, 2003). However, that basket price has averaged $31.08/bbl so far this year and has remained above OPEC's targeted level of $22-28/bbl since late last year, despite the group's previous pledge to take action if market prices remained above or below the target level for extended periods.

Jefferies on Monday raised its 2003 price forecasts to an average $29/bbl for benchmark West Texas Intermediate crude and $5/MMbtu for natural gas at Henry Hub. That's up from its earlier projections of $25/bbl for oil and $4/MMbtu for gas.

"The keys to our higher forecast include bullish US and worldwide crude inventory levels, our belief that OPEC will remain a cohesive unit for the foreseeable future, and the difficulties non-OPEC producers are experiencing expanding production," Jefferies analysts reported.

"Although it is certainly a difficult time to pinpoint near-term oil price movements due to the Iraq situation and strike-induced fluctuations in Venezuela crude, the underlying principles that drive crude prices are solid, in our view," the analysts said.