Marketplace Report: OPEC Deal Boosts Oil Prices
ALEX CHADWICK, host:
Back now with DAY TO DAY. If you're listening to this program while driving, pull over now and fill up. Oil prices are back up above $60 a barrel, with reports OPEC is preparing to cut production. This would be the group's first cutback in more than two years. I spoke earlier with Bob Moon, senior business correspondent for MARKETPLACE, and asked how come the price for a barrel of oil is going up just with reports of a cut in production?
BOB MOON: Sometimes, Alex, all it takes is a rumor to set the oil market soft, and this actually seems to be a little stronger than a rumor. Both the Reuters News Service and Dow Jones news wires are reporting that OPEC ministers have agreed to take at least a million barrels of oil per day off the global markets. They reportedly plan to do that as soon as possible.
There were conflicting reports today on the schedule for an emergency meeting to discuss these cutbacks, but OPEC officials know from past experience that sometimes all it takes is just talking about a production cutback to shore up prices.
It seems pretty clear here there are moves among many of the leading OPEC countries, though, to start dealing with the current over-supply of oil around the world. Since middle July, oil prices have plunged by around 23 percent. And here in the U.S., fuel stocks are higher than they've been in the past seven years. We're the world's top oil consumer, so that's really a big part of the reason that oil prices have been falling.
CHADWICK: Has there been an official reaction from the U.S. government to this yet?
MOON: Well, Reuters is reporting that the Bush administration is dismayed by this news. Energy Secretary Sam Bodman told Reuters that he plans to tell OPEC leaders that the world still needs all the OPEC oil that it can get heading into winter. In fact, oil supplies heading into winter are an important consideration here. But something unspoken here is that this could mean heading into the mid-term Congressional elections next month that oil prices could start going up. And political analysts have told us that Republican candidates have been lifted by improving prices at the pump. So that's no small consideration here, too.
Energy Secretary Bodman told Reuters that he thinks having oil prices right around where they are now, around $60 a barrel, continues to be profitable for producers.
CHADWICK: Is there any word on what OPEC thinks about that? What do they think is profitable and good? What are they looking for?
MOON: Yeah, there are hints coming out of OPEC, speculation among oil traders as well, that OPEC is interested in defending a price level somewhere around $55 a barrel - at least in the short term. Oil analysts say that oil was plunging, and then it's kind of hit the floor at around that level.
And we'll be looking further into the implications of all this today in the MARKETPLACE newsroom.
CHADWICK: Thanks Bob. Bob Moon of public radio's daily business show MARKETPLACE from American Public Media.