OPEC Sets Higher Production Ceiling
OPEC Sets Higher Production Ceiling
Oil futures are recovering after falling to a five-week low Wednesday, amid fears of declining demand and OPEC's decision to set a higher production ceiling for the next six months. The decision effectively ratified Saudi Arabia's move in recent months to pump more oil in an attempt to rein in soaring crude prices.
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OPEC, the Organization of Petroleum Exporting Countries, has voted to up the ceiling for the amount of oil its members can pump over the next six months. That effectively ratified what Saudi Arabia is already doing in an attempt to rein in soaring crude prices. In reaction, oil futures are recovering from a big slide yesterday. 's move to pump more oil in an attempt to rein in soaring crude prices. NPR's Peter Kenyon was at the OPEC meeting in Vienna and has this report.
PETER KENYON, BYLINE: OPEC bristles at the term cartel, and its power to move markets isn't what it used to be. But its 12 member states do still control something like a third of the world's oil supply. Some economists see oil prices near or over $100 a barrel as a drag on economic recovery, but outgoing OPEC President Rostam Ghasemi of Iran thinks otherwise. He's heard, here, through an interpreter.
ROSTAM GHASEMI: (Through translator) I think the market is well balanced and the prices are also reasonable. And the ceiling is suitable for both producers and consumers.
KENYON: The meeting started late and ended early, but compared with the unusual public acrimony that followed last June's OPEC gathering, it was cordial and produced the first new production ceiling in three years, 30 million barrels a day. But internal differences and worries for 2012 clearly remain.
Ghasemi told reporters before the meeting started that the Saudi oil minister had assured him the kingdom would not increase production if Iran's exports were hit with sanctions. That supports Iranian warnings that oil sanctions, such as those contemplated by the EU, would have dire consequences.
But Ali Ibrahim Al-Naimi, the Saudi oil minister, refused to confirm that, and pointedly said that the world's number one oil producer would respond to market demands.
ALI IBRAHIM AL-NAIMI: We react to a market and we have customers. And the customers are saying we need more oil. How would you react?
KENYON: Independent energy analyst Cornelia Meyer believes that if Iran's oil exports did suddenly go offline, the Saudis would certainly increase their output to compensate.
CORNELIA MEYER: There's not that much Iranian oil in the EU. So it's not that much oil that's going to be taken off. And Saudi will produce for Iran. So we're really not in bad shape. But psychologically, it will have an effect.
KENYON: Other than worries over Iran sanctions, analyst say most of the pressure they're seeing on prices is downward. The supply is increasing as Libya restores its crude production faster than expected, and Iraq is also rebuilding its oil sector. The demand, meanwhile, is the big question.
With faltering eurozone economies dominating the news, and even china's growth decelerating, a number of analysts at this meeting said barring extraordinary developments, they expect oil prices to come down. Even though individual country quotas seem to have been abandoned for at least the next six months, OPEC Secretary-general Abdalla el-Badri called yesterday's meeting a success. He said now it's up to the markets.
ABDALLA EL-BADRI: We don't want to defend any price. This is our production, and we'll let the market behave as - how it sees this decision.
KENYON: At the moment, the markets appear confused and anxious, with investors placing unusually large bets in both directions - some anticipating a spike as high as $150 a barrel, others hedging against a crash down to $50. And in the current economic climate, analysts say it's no longer OPEC's supply decisions that are driving the markets, but the deep political and economic uncertainties looming as 2012 approaches.
Peter Kenyon, NPR News, Vienna.
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