- The Washington Times - Thursday, June 1, 2006

CARACAS, Venezuela (AP) — OPEC, pumping near capacity, was set to leave its oil output unchanged yesterday, rejecting suggestions by Venezuela to prop up prices with a production cut.

Oil ministers reached an informal agreement going into talks yesterday not to alter the current quota, said Qatari Oil Minister Abdullah al-Attiyah. Speaking shortly before OPEC’s formal meeting, he said the market has more than enough supply but that “at this price level, OPEC won’t cut production.”

However, Mr. al-Attiyah cautioned that OPEC could change course by the time it meets in September.

Indeed, analysts said the Organization of Petroleum Exporting Countries appears to have put aside concerns about rising global inventories of crude and weakening demand growth, at least temporarily, to focus on a more immediate worry: $70-a-barrel oil.

“Most of the members are not comfortable with these prices,” said Michael Lynch, president of Winchester, Mass.-based Strategic Energy and Economic Research. “They may expect the market to weaken in the second half of the year, but they still feel the price is too high for them to cut production right now.”

Yasser Elguindi, Medley Global Advisors senior managing director, said most OPEC members “don’t want to send any signals to the market that there’s a floor at $70.”

While high oil prices mean big profits for oil producers in the near term, the longer-term risk is that they could cause a drop-off in economic growth and energy consumption and spur the development of alternative energy sources.

Saudi Oil Minister Ali Naimi declined to confirm that an informal agreement had been reached on production, but described petroleum markets as “oversupplied and overpriced” just before he headed into the meeting.

But Iran’s oil minister, Sayed Kazem Vaziri Hamaneh, said he did not expect “any new decision” after the formal deliberations.

Venezuelan President Hugo Chavez, a longtime price hawk, suggested trimming production and he repeated calls for OPEC to establish a minimum price of $50 a barrel.

“There is enough oil on the market. We even believe there is an excess of oil on the market,” Mr. Chavez said in a speech. “Fifty dollars is a fair price, but as a minimum.”

He said the price “ceiling would be infinity.”

Nigerian Petroleum Minister Edmund Daukoru said Mr. Chavez’s idea was not formally proposed to OPEC, meaning it will not be considered in Caracas.

Mr. Hamaneh expressed support, saying through an interpreter that “it seems to me that OPEC can agree with the issue of the floor of $50.”

Crude prices slipped yesterday, but hovered above $70 a barrel on the New York Mercantile Exchange, after Iran’s foreign minister welcomed the idea of direct talks with the United States over its nuclear program, but rebuffed the U.S. condition that Tehran first suspend uranium enrichment.

As many expected, Mr. Chavez also used the OPEC meeting as a political platform, demanding that the U.S. pull its troops out of Iraq and “end the threats against the Iranian people.”

Mr. Chavez, a harsh and frequent critic of Washington, called President Bush a “threat to the world” and predicted his U.S. “empire” would end within a century. And he criticized rich countries for complaining about high oil prices.

Anthony Sabino, a law professor at St. John’s University in New York, said the high prices reflect global politics.

Given the war in Iraq, tensions over Iran and other factors, “there is no reason for OPEC nations to lower oil prices, which are the only true leverage these countries have,” Mr. Sabino said. “This is particularly the case with Venezuela, given the growing animosity between Hugo Chavez and the U.S.”

Hosting OPEC, Mr. Chavez also recommended expanding the cartel to include Ecuador, which left the group 14 years ago.

Venezuelan Oil Minister Rafael Ramirez said his country would back a proposal by Nigeria to add Sudan to OPEC’s ranks. And Angola sent a delegation to the meeting, lobbying for membership in the group.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide