OPEC Delays Decision on Boosting Oil-Production Quota

May 22 (Bloomberg) — The Organization of Petroleum Exporting Countries delayed a decision on Saudi Arabia’s proposal to lift the group’s oil-output quota as the U.S. and other nations press for more supply to lower near-record prices.
OPEC Delays Decision on Boosting Oil-Production Quota (Update3)

May 22 (Bloomberg) — The Organization of Petroleum Exporting Countries delayed a decision on Saudi Arabia’s proposal to lift the group’s oil-output quota as the U.S. and other nations press for more supply to lower near-record prices.

OPEC will decide on output at its June 3 meeting in Beirut, President Purnomo Yusgiantoro said after the group met informally in Amsterdam. Saudi Arabia, the world’s largest oil exporter, said yesterday it will unilaterally boost production by about 8 percent next month to help prevent a slowdown in the world economy.

“We remain deeply concerned about the continuing rise in the crude oil price,” Purnomo told reporters at a news conference. “Bringing order and stability to the world market is the responsibility of all stakeholders in the industry.”

U.S. Energy Secretary Spencer Abraham had said he would seek assurances this weekend that OPEC, the source of about a third of the world’s oil, would boost supplies as gasoline prices soar at home. Crude oil reached a record of $41.85 a barrel in New York on Monday as global demand increases the most since 1988.

“There is a need to get significantly more oil in the marketplace,” Abraham said earlier today. “I hope that after today, or certainly after the next couple of days, it’ll be clearer whether or not we’re talking about real increases.”

Objections

Saudi Arabia announced its plan to pump more oil one day before the start of the International Energy Forum, a three-day gathering of more than 40 oil producing and consuming countries in Amsterdam. Venezuela objected to the proposed higher quota, saying there’s enough oil in the market.

“It looks like the Saudi proposal has run into major hurdles,” said Nauman Barakat, senior vice president at Refco Energy Markets in New York. “The Saudis need to do a lot more horse-trading between now and Beirut.”

OPEC ministers, including Iran, said high oil prices stem from reasons outside their control, including a lack of refining capacity in the U.S., political tensions, investor speculation and growing demand. Iran is OPEC’s second-largest producer.

“There’s more demand from the U.S. economy and China,” said Jeroen Van der Veer, chairman of Royal Dutch/Shell Group, Europe’s No. 2 oil company. “Secondly it has to do with tensions in the Middle East, so that’s the psychology of the market.”

Saudi Plan

Crude oil fell 2.1 percent in New York yesterday after Saudi Oil Minister Ali al-Naimi said the kingdom will boost output to 9 million barrels a day next month. That would exceed its current OPEC quota of 7.64 million by 18 percent and equal about 11 percent of global demand.

Al-Naimi also urged OPEC to boost its output target by at least 2 million barrels a day from 23.5 million. Oil prices had risen since al-Naimi 10 days earlier proposed an increase of 1.5 million barrels or more.

OPEC has said April production was 25.5 million barrels a day, already 2 million above its current limit. Saudi Arabia is the only OPEC member with spare capacity, Iranian and Qatari oil ministry officials said.

Crude oil for July delivery closed yesterday at $39.93 a barrel in New York, below $40 for the first time since May 10. OPEC’s delayed output decision “gives them leverage,” said Tim Van Doorn, an energy analyst at Fortis NV in Amsterdam.

“They might want to see the reaction of the market,” he said. “If the market does move their way, they give themselves more time.”

World demand is rising by 1.95 million barrels a day this year to about 80.6 million, the most since 1988, according to the International Energy Agency, the Paris-based adviser to 26 oil- consuming countries.

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