THE WALL STREET JOURNAL: OPEC Mulls Output Hike As Traders Wait For Ivan's Impact: “Shell began pulling workers off its platforms on Sunday. BP and others followed suit on Monday.” (ShellNews.net)
DOW JONES NEWSWIRES
September 15, 2004 1:03 a.m.
VIENNA, Austria (AP)--As members of the Organization of Petroleum Exporting Countries ponder whether to boost production at their meeting Wednesday, analysts said their decision -whatever it'll be -won't succeed in lowering high oil prices.
Elsewhere, traders were unnerved by the ferocity of Hurricane Ivan heading toward the oil and natural gas rigs in the Gulf of Mexico, and an audacious attack by insurgents on a crucial oil pipeline juncture in Iraq that showed the vulnerability of the country's oil production.
"You're going to keep prices in the high 30s and the low 40s for the foreseeable future," said Peter Gignoux a senior oil adviser to GDP Associates in New York. "Oil has been in play ... and it's going to get the headlines for some time."
OPEC members themselves were divided about how best to keep a lid on oil prices, which have been hovering around $40 to $43 this year.
Members realize that higher prices mean increased revenue, not only for state coffers, but residents, too.
"OPEC is doing its part, but OPEC is not the only player in town and people do want to make money," Saudi Oil Minister Ali Naimi said. "They know there is no better way to make it than to do what they are doing in the market. There is not much that we can do."
The 11-country cartel was set to meet Wednesday.
OPEC members will consider the idea of raising output by 2 million barrels a day, or more than 7%, when they meet today.
If approved, the decision would increase OPEC's self-imposed output limit for all its members, except Iraq, from 26 million barrels a day to 28 million barrels, bringing the cartel in line with actual output, which stands at more than 27.4 million barrels.
Oil prices have soared in the past months because of the extremely thin margin of spare output capacity worldwide and fears of supply disruptions around the globe.
Nigeria's OPEC representative, Edmund Dakoru, said he wanted the OPEC price band to be raised to $30-$40 from its current $22-$28.
The two main issues being considered at the meeting are whether to increase quotas and whether to raise the price band, said Leo Drollas, chief economist for the London-based Center for Global Energy Studies.
"Both issues are not relevant today because the market is still tight and most OPEC countries are very near capacity. ... There's nothing they can do or say" which would change the market, he said, describing the meeting as "a bit of a nonevent."
Predicting that prices would stay at current high levels through the end of the year, Drollas said that "the demand side drives the prices rather than the supply side."
In trading Tuesday, Hurricane Ivan was blamed for a rise in crude future prices. Analysts warned that regardless of where in the Gulf of Mexico the hurricane made landfall, its size was sure to threaten many of the oil rigs and platforms off the coast of the United States. Several rigs in the Gulf of Mexico were evacuated and production halted as Ivan made its way north.
Jan Stuart, head of energy research at FIMAT USA, a brokerage unit of Societe Generale, said Shell began pulling workers off its platforms on Sunday. BP and others followed suit on Monday.
Traders also reacted to Tuesday's attack in Iraq.
As OPEC members arrived in Vienna for Wednesday's meeting, saboteurs in Iraq blew up a junction where multiple oil pipelines cross the Tigris River near Beiji, 155 miles north of Baghdad. The blast left the entire country without power.
In Vienna, Iraqi Oil Minister Thamer al-Ghadhban said his country would try to maintain its production of more than 2.5 million barrels of oil a day, 2 million of which is exported daily. But he didn't say how.
"I'm confident security will be improved," al-Ghadhban told reporters.
Iraqi oil officials have been struggling to guard the country's vast oil infrastructure, deploying thousands of security officers. Insurgents, however, have largely acted with impunity -and often with apparent inside knowledge.
A long-term interruption of Iraqi production would be felt by buyers and consumers, Drollas said.
"Any attack will push up the price until the market hears that it's being fixed," he said.
But the disruption of Iraq's oil production wasn't expected to hinder OPEC decision-making.
Naimi said the cartel believes the market is being driven by fear rather than substance, adding that OPEC has been producing more than enough oil to meet growing demand.
Libya's OPEC Governor Hammouda el-Aswad said fears of a price slide would render a hike in quotas irresponsible.
He said his country, which was freed of sanctions this year, is pumping nearly 1.75 million barrels a day and expects to increase that by 300,000 more barrels by 2006.
Venezuelan Oil Minister Rafael Ramirez said prices need to be discussed, but held back on pushing for an increase in quotas "because the market is well supplied."