Opec will not cut oil production as prices soar

THE ORGANISATION of Petroleum Exporting Countries (Opec), supplier of more than a third of the world’s oil, will not consider cutting production at a meeting in Iran in a fortnight with prices higher than US$50 a barrel.

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By  Rhys Jones Published  March 6, 2005

THE ORGANISATION of Petroleum Exporting Countries (Opec), supplier of more than a third of the world’s oil, will not consider cutting production at a meeting in Iran in a fortnight with prices higher than US$50 a barrel. Oil closed at a four-month high of US$51.75 a barrel in New York last Monday, after gaining 19% this year. Opec members are producing around 200,000 barrels a day more than the demand for its oil, acting secretary-general Adnan Shihab-Eldin said. “The environment right now with prices of West Texas Intermediate going over US$50 is not conducive to considering cuts in production,” said Shihab-Eldin. “We can afford to wait. If prices continue to be at this level, I think Opec may elect to wait,” he added. Global fuel demand is forecast to rise this year, leaving little spare capacity to make up for any supply disruption. Opec’s members have reduced production each month since October, when output was at its highest rate since December 1979. Opec president Sheikh Ahmad Fahd Al Sabah confirmed he would propose maintaining the cartel’s current production ceiling at its March 16 meeting in Isfahan, Iran but said the group would consider an increase if prices continue to rise. “Because prices are still high, we think we have to support the idea of continuing with our ceiling and, if prices go higher, even with that, we have to study maybe increasing our production if it’s necessary,” said Sheikh Ahmad, who is also energy minister of Kuwait. “Until our meeting in Isfahan we will maintain our ceiling and my proposal to my colleagues the members of OPEC is to maintain the ceiling of production just to make the price more stable and to try to solve the problem of the market worries,” he added. Sheikh Ahmad was speaking at the inauguration of the second phase of a power plant built by Siemens at a ceremony attended by German chancellor Gerhard Schroeder in Al Zour, 80 kilometres south of Kuwait City. Schroeder arrived in Kuwait from Saudi Arabia on the second leg of a regional tour.

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