OPEC discusses Saudi proposal to raise oil output
Sunday, May 23, 2004
AMSTERDAM, Netherlands -- OPEC is "deeply concerned" about the recent rise in oil prices but deferred making a decision on increasing its output target until its members meet next month, the group's president said Saturday.
Under intense pressure to pump more oil to reduce crude prices, the Organization of Petroleum Exporting Countries discussed a Saudi proposal for an 8.5 percent increase in the production target. But Saturday's talks were informal, and the group is to decide whether to follow the Saudi lead when all of its members meet on June 3 in Beirut, OPEC president Purnomo Yusgiantoro told a news conference.
Yusgiantoro stressed that the current high prices are not the fault of OPEC nor the result of inadequate supply, but were caused by several factors: bottlenecks in the production of gasoline, geopolitical tensions, an unexpected strength in demand and heavy speculation.
Oil prices fell by as much as $1 per barrel after Saudi Arabia said Friday it would push OPEC to raise its daily ceiling by 2 million barrels in an effort to safeguard global economic growth and ease concerns about possible shortfalls in supply.
At least nine of the 11 members of OPEC arrived in Amsterdam to discuss the proposal ahead of a conference of energy producers and consumers.
"We do encourage and support any proposal to increase the production ceiling level. We believe that the high oil price harms economic growth," Iraqi Oil Minister Ibrahim Bahr al-Uloum told reporters.
An unforeseen burst in global demand has stretched crude supplies, and concerns about security problems in the oil-rich Middle East has contributed to turmoil in the market. Crude prices have soared above $40 a barrel, and OPEC, which decided only in March to cut its official output, has come under growing pressure from the United States and other consuming nations to boost production as soon as possible.
OPEC supplies about a third of the world's oil. It has a daily output target of 23.5 million barrels, but the group's members are already pumping at least 2 million barrels above that level. Given this amount of overproduction, analysts have questioned whether an increase in OPEC's ceiling would translate into additional physical barrels of crude hitting the market.
Most OPEC members are pumping as much crude as they can, and Saudi Arabia is the only member with significant untapped production capacity. The Saudi Oil Ministry said in a statement that it had already pledged to increase its production to around 9 million barrels a day as of June 1. The Saudi government is currently believed to be producing between 8.4 million and 8.6 million barrels a day.