OPEC tries to avoid crash landing as U.S. lobbies for sharp increase in production
By Steve Rodan
SPECIAL TO WORLD TRIBUNE.COM
Tuesday, March 28, 2000
VIENNA -- For OPEC oil ministers meeting in the Austrian capital, the
question is not whether to end the party.
The trick is how to ensure that the revelers don't crash on the way home.
Few, if any, OPEC oil ministers have any illusions over the next few
months. They agree that with the approach of summer, increased Iraqi oil
production and the rising influence of new oil producers, the price of a
barrel of crude will drop.
They have little hope that by June prices will even approach the highs
this month -- when a barrel topped $30.
The question for OPEC oil ministers is whether oil could stabilize at $24
a barrel. For many OPEC members, the future of their economies depend on it.
"We're looking at long-term stability in the market," said Saud Nasser Al
Sabah, oil minister for the United Arab Emirates. "Our country depends
entirely on the income from the output of oil and this is a crucial point."
The United States is not attending the OPEC meeting. But it is clearly
the most important factor in Vienna. U.S. Energy Secretary Bill Richardson
has lobbied OPEC members over the last month and has
persuaded even holdouts as Kuwait and the UAE to accede to a significant oil
production increase.
The question at the Vienna meeting is how much how soon. Most OPEC
ministers appear unwilling to follow the U.S. demand for a 2 million barrel
per day increase that would start on April 1.
"Prices would immediately crash and everything we gained over the last
year would be eliminated," an OPEC official said. "We know prices are going
to fall. We just want them to fall gradually."
The assessment is that despite Iranian opposition OPEC will follow the
Saudi recommendation and approve an oil output increase of about 1.5 million
barrels per day. What appears left is deciding when the increase should begin.
Even the Saudis don't want an immediate change.
As a result, the deliberations have gone beyond schedule and the oil
ministers meeting that had been planned for 10 a.m. could begin on Monday
evening and head into Tuesday.
Oil ministers said the most likely scenario is to approve a slight
increase in oil production immediately and return for a review at the end of
June.
But some oil analysts say that in the end, any OPEC decision will be
immaterial. Paul Michael Wihbey, a leading Washington-based analyst with the
Institute for Advanced Strategic and Political Studies, sees a dramatic fall
in OPEC's influence and oil power in general.
Wihbey said OPEC is being overshadowed by Russia, Central Asia and
emerging producers in Africa, particularly Nigeria. He said the United States
has been wooing some of these countries as alternative suppliers.
The analyst said the rise of oil over the last year -- taken after OPEC
limited production to about 24 million barrels per day -- was more the
result of a U.S. decision to help Gulf oil economies. Mexico, Wihbey said,
supported the oil production decrease on the advice of Washington.
Now, Wihbey said, Mexico is the leader in pressing for an oil production
increase. The Saudis have followed suit.
"The high prices were also meant to encourage Saudi Arabia to join the
Middle East peace process," Wihbey said. "All of these policies are being
retracted. We have a changing situation in which there will be a gradual
U.S. disengagement from the Persian Gulf. This is a reflection of the decreasing
U.S. dependence on Gulf oil."
Tuesday, March 28, 2000
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