Will the price of oil go higher as a result of the OPEC decision not to
increase production quotas? Or has this decision already been
discounted in the $30 price level? Note that Iraq is now increasing its
exports. CH http://www.nytimes.com/2002/09/19/business/worldbusiness/19OIL.html
Title: Steady-Output Faction Is Expecting Victory in OPEC
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Steady-Output Faction Is Expecting Victory in OPEC
By KEITH BRADSHER
SAKA, Japan, Thursday, Sept. 19 — Oil ministers from countries that want to hold production steady and keep prices high claimed victory on Wednesday night and this morning before a meeting this afternoon of the Organization of the Petroleum Exporting Countries, saying that a consensus had been reached in their favor.
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A succession of ministers said there was no need to pump more oil, despite evidence that shortages might cause higher prices in the months ahead. Rilwanu Lukman, Nigeria's top oil official, who is currently OPEC'S president and whose country has scant capacity to increase output further anyway, said here this morning that "there is a consensus that there is enough oil."
But oil officials of Saudi Arabia, which is being asked to give up more than $1 billion a month in revenue by continuing to keep some oil fields partly idle, were silent, leaving it unclear whether a deal had actually been concluded.
In New York, oil prices rose on Wednesday on the possibility that output will not increase. Crude oil for October delivery rose 40 cents, or 1.4 percent, to $29.48 a barrel. Prices rose as high as $29.80 during trading.
If OPEC left production unchanged, world inventories of crude might continue their recent decline, allowing prices to rise, especially if the United States attacked Iraq or some other event disrupted supply this winter. The Energy Department reported on Wednesday that crude oil supplies in the United States had fallen sharply, as had gasoline and diesel supplies.
Antoine Halff, a principal administrator of the International Energy Agency, an organization based in Paris that represents big oil-consuming nations, said that going into the Northern Hemisphere winter, the level of inventories was "at the low end of the five-year range — we've been for a while, and it has been going down and down and down."
American supplies of heating oil have also risen much less than they normally would for this time of year, raising the prospect that heating homes could be expensive this winter. That could be especially true in the Northeast, which relies more on heating oil and less on natural gas than the rest of the country.
But OPEC ministers here said that the world had plenty of oil. Obeid bin Saif al-Nasiri, the minister of petroleum and mineral resources for the United Arab Emirates, said that there was a greater possibility of too much oil, and a fall in prices, than of having too little.
OPEC has been trying to keep international oil prices at $22 to $28 a barrel, using a combined measure for prices of seven grades of oil. That combined measure tends to be somewhat lower than the price for oil traded in New York.
Mr. Nasiri said OPEC could act later if prices went higher than the cartel expected. "If it goes above range, then we will think of doing something about prices," he said, adding that OPEC ministers might meet again in early December to review the market.
The oil ministers of Kuwait and Qatar, two advocates of leaving OPEC's output quotas unchanged, said on Wednesday night that other ministers agreed with them. Sheik Ahmad al-Fahd al-Sabah, the acting oil minister of Kuwait, emerged on Wednesday night from a meeting with his counterparts from Saudi Arabia, the United Arab Emirates and Qatar and said that OPEC ministers were in agreement.
"Everybody is willing to keep the current OPEC ceiling," he said.
Abdullah bin Hamad al-Attiyah, Qatar's minister of energy and industry, echoed that point after the meeting, saying, "We believe there is an understanding among all of us."
Predicting oil output this winter is difficult. OPEC has acknowledged producing 9 percent more oil during the summer than the countries' combined quotas because many countries cheated. Saudi Arabia is said to have argued for raising quotas and reducing the cheating to preserve OPEC's credibility. Other OPEC countries fear higher quotas could lead markets to expect lower prices.
Analysts said OPEC's reluctance to increase its output had been complicated by a decision earlier this week by Iraq to remove a surcharge on its oil shipments, a move that could increase its exports.
Iraq is a member of OPEC, but its oil exports have been regulated by the United Nations since the Persian Gulf war. Sales of Iraqi crude oil are supposed to provide revenue to buy food and medicine for Iraq's people. But over the last two years or so, Iraq has demanded that traders pay it a surcharge to buy the oil. On occasion the surcharge has reached 70 cents a barrel, analysts said.
Those analysts speculate that the extra income may have been used by Saddam Hussein to finance weapons programs. Some oil companies were unwilling to pay the surcharge, contributing in part to a sharp decline in Iraqi oil shipments in the last year. By ending the surcharge, Iraq may find more buyers for its oil, experts said.
"The move is going to increase Iraqi output by 300,000 to 500,000 barrels a day," estimated Roger Diwan, managing director at the Petroleum Finance Company, a consulting firm in Washington. "So that removes a lot of incentive for OPEC to do anything."
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