OPEC agrees to increase of 2.0 million barrels per day
Posted: Thu Jun 03, 2004 2:18 pm
Extra
OPEC opens taps; crude prices dive
Increase in production ceiling by 2 million barrels a day is less than hoped, but move has desired effect. One analyst says prices could fall $5 a barrel.
By Andrew Mitchell and Khaled Oweis, Reuters
OPEC on Thursday agreed to raise output by 2 million barrels a day from July, at the bottom end of expectations, but made the intended effect: oil prices sank. In a two-stage pact the 11-member Organization of the Petroleum Exporting Countries, meeting in Beirut, promised to add a further 500,000 barrels a day from Aug. 1.
"It will send a very, very strong signal to the market,'' said Saudi Arabian Oil Minister Ali al-Naimi. He said the extra August increment was not negotiable on the downside and could even be altered higher.
"It's a good agreement, we will be able to test the impact of the policy on the oil market before we meet again in July,'' said Qatari Oil Minister Abdullah al-Attiyah. OPEC meets again on July 21.
OPEC has been under enormous pressure from consumer countries worried about the impact of inflated energy costs on economic growth. For their own part producers do not want prices at heights that put fuel demand at risk. Point. Click. Pay.
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At first sight, Thursday's deal lifting group limits by 8%, to 25.5 million barrels daily from July 1, was a disappointment for those expecting OPEC to deliver more immediately.
But oil prices fell on the view that OPEC's core Gulf producers are serious about cheaper oil. By 2 p.m. EDT, U.S. crude was off $1.31 a barrel at $38.65.
"This is the first time in two years that OPEC has set quotas at a level that reflects underlining forward demand for their oil,'' said Marshall Hall of London's Energy Market Consultants.
"We think prices could come off $5 a barrel in 30 days because the Saudis, the Kuwaitis and the Emiratis will produce enough to ensure prices go down.''
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U.S. oil has been around the $40 mark for the past three weeks, fueled by demand growth and worries about supply security in the Middle East.
U.S. applauds
The United States lauded the agreement, saying sufficient supplies were critical to sustaining economic growth.
"This welcome action demonstrates that producers are taking concrete and immediate steps to address the global oil supply needs,'' said White House spokesman Claire Buchan.
Delegates said the pact was a compromise between Saudi Arabia and countries like Iran and Venezuela which feared a Saudi proposal for an immediate 2.5 million increment could trigger a big price collapse.
But the official details will make little difference to actual supplies from the cartel that controls more than half the world's oil exports.
That's because group output already is at official new quota limits.
"For supply into the market, it's irrelevant,'' said Roger Diwan of Washington's PFC Energy consultancy.
Regardless of official allocations, Saudi Arabia and the United Arab Emirates confirmed to reporters they would deliver about a million barrels daily of real extra oil in June.
The two countries are OPEC's only members with much spare capacity.
Saudi's Naimi reiterated that Riyadh was pumping 9.1 million barrels a day, an addition of about 700,000 barrels per day. The UAE is adding 400,000 barrels a day.
Every dollar increase in a barrel of crude translates into 2.4 cents at the gas pump.
OPEC opens taps; crude prices dive
Increase in production ceiling by 2 million barrels a day is less than hoped, but move has desired effect. One analyst says prices could fall $5 a barrel.
By Andrew Mitchell and Khaled Oweis, Reuters
OPEC on Thursday agreed to raise output by 2 million barrels a day from July, at the bottom end of expectations, but made the intended effect: oil prices sank. In a two-stage pact the 11-member Organization of the Petroleum Exporting Countries, meeting in Beirut, promised to add a further 500,000 barrels a day from Aug. 1.
"It will send a very, very strong signal to the market,'' said Saudi Arabian Oil Minister Ali al-Naimi. He said the extra August increment was not negotiable on the downside and could even be altered higher.
"It's a good agreement, we will be able to test the impact of the policy on the oil market before we meet again in July,'' said Qatari Oil Minister Abdullah al-Attiyah. OPEC meets again on July 21.
OPEC has been under enormous pressure from consumer countries worried about the impact of inflated energy costs on economic growth. For their own part producers do not want prices at heights that put fuel demand at risk. Point. Click. Pay.
Pay your bills in seconds
with MSN Bill Pay.
At first sight, Thursday's deal lifting group limits by 8%, to 25.5 million barrels daily from July 1, was a disappointment for those expecting OPEC to deliver more immediately.
But oil prices fell on the view that OPEC's core Gulf producers are serious about cheaper oil. By 2 p.m. EDT, U.S. crude was off $1.31 a barrel at $38.65.
"This is the first time in two years that OPEC has set quotas at a level that reflects underlining forward demand for their oil,'' said Marshall Hall of London's Energy Market Consultants.
"We think prices could come off $5 a barrel in 30 days because the Saudis, the Kuwaitis and the Emiratis will produce enough to ensure prices go down.''
--------------------------------------------------------------------------------
Rising gas prices -- full coverage on MSN • A long, hot summer at the gas pump
• Find the cheapest gas in town
• Don’t cancel that road trip yet
• 14 ways to save on $2-a-gallon gas
• Video: Unusual ways to find lowest price
• Where you’d pay $5.97 a gallon
--------------------------------------------------------------------------------
U.S. oil has been around the $40 mark for the past three weeks, fueled by demand growth and worries about supply security in the Middle East.
U.S. applauds
The United States lauded the agreement, saying sufficient supplies were critical to sustaining economic growth.
"This welcome action demonstrates that producers are taking concrete and immediate steps to address the global oil supply needs,'' said White House spokesman Claire Buchan.
Delegates said the pact was a compromise between Saudi Arabia and countries like Iran and Venezuela which feared a Saudi proposal for an immediate 2.5 million increment could trigger a big price collapse.
But the official details will make little difference to actual supplies from the cartel that controls more than half the world's oil exports.
That's because group output already is at official new quota limits.
"For supply into the market, it's irrelevant,'' said Roger Diwan of Washington's PFC Energy consultancy.
Regardless of official allocations, Saudi Arabia and the United Arab Emirates confirmed to reporters they would deliver about a million barrels daily of real extra oil in June.
The two countries are OPEC's only members with much spare capacity.
Saudi's Naimi reiterated that Riyadh was pumping 9.1 million barrels a day, an addition of about 700,000 barrels per day. The UAE is adding 400,000 barrels a day.
Every dollar increase in a barrel of crude translates into 2.4 cents at the gas pump.
lol
