OPEC trying to stall postwar plunge in oil price
By Seattle Times news services
LONDON — OPEC members plan an emergency meeting this month aimed at curbing runaway crude production to avert a possible price crash.
Oil ministers at the Organization of Petroleum Exporting Countries have agreed to meet April 24 in Vienna, Austria.
OPEC President Abdullah al-Attiyah said he had proposed the emergency meeting to prevent a postwar fall in oil prices.
"My main worry is how to deal with the dramatic price drop," said al-Attiyah, the oil minister for Qatar, after discussions with OPEC Secretary-General Alvaro Silva. "The market is full of oil, it's facing a glut not a shortage."
Most OPEC members have been producing at maximum capacity to keep world oil supplies plentiful during the war. However, oil ministers are increasingly worried that OPEC might be oversupplying the market just as demand starts falling to its seasonal low.
The group has decided not to wait until OPEC's benchmark price for oil falls below the group's minimum threshold of $22 a barrel.
Oil prices have fallen sharply since peaking at $37.64 a barrel on March 12. Yesterday, oil was at $27.76 in U.S. trading.
Kevin Norrish, head of commodities research at Barclays Capital, said OPEC is right to be concerned about weak prices.
Saudi Arabia, the group's biggest member, has made "a massive increase" in output, while exports from Venezuela are growing steadily after the recent collapse of a nationwide strike. Output in Nigeria is starting to recover from disruptions caused by social unrest, and Iraq will eventually resume production, Norrish said.
Demand typically falls in the second quarter due to declining sales of winter heating oil in the Northern Hemisphere. Demand for gasoline often doesn't pick up until the peak summer driving season.
This year, springtime demand is expected to fall more sharply than usual. With a wartime supply shortage looking unlikely, oil-importing countries will stop buying crude for their strategic reserves, Norrish said.
"I think OPEC is correct to identify the possibility of a sharp fall," he said. Compiled from The Associated Press and Bloomberg News.