OPEC Suggests No Output Change Till Cut in April
Published: January 30, 2005
VIENNA, Jan. 29 - Oil ministers gathered here for the OPEC meeting signaled Saturday that they would leave production targets unchanged at their session on Sunday, but suggested that they might cut output in April to fend off a seasonal slowdown in demand when winter ends in the Northern Hemisphere.
"We will keep the ceiling as it is to comply with the resolution of Cairo, and we will continue to follow up on the market to see if there are necessary measures we need to take," Sheik Ahmad Fahad al-Sabah, Kuwait's representative and the OPEC president, said Saturday.
OPEC is finding it hard to justify a reduction in production with oil trading close to last year's record highs in New York. At the same time, the oil-producing group is worried that slowing demand in the second quarter could lead prices to drop suddenly if supplies remained unchanged.
Sheik Sabah said OPEC would act before its next meeting, set for March, if prices slumped. Crude oil futures on the New York Mercantile Exchange dropped 3.4 percent, to $47.18 a barrel on Friday, $8 below last October's record, as traders expected that OPEC would not change production on Sunday.
Many analysts said they thought OPEC was seeking higher prices than the group's official range of $22 to $28 a barrel, suggesting an average of $40 a barrel as a new target for the benchmark price.
Strong demand from China and the United States, limited spare capacity, and bottlenecks in refineries in consuming countries pushed up oil prices by more than a third last year. Fears that supplies could be disrupted in producing countries like Iraq or Nigeria and stretch the world's production capacity to its limits, added to the tightness on the market.
After increasing its output to the highest level in 25 years in 2004, OPEC is seeking to rein in production as demand slows. When OPEC producers met in December, they decided to cut production by 1 million barrels a day, to 27 million barrels a day. Analysts estimate that production has dropped by only 500,000 barrels a day because some producers did not honor the agreement.