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New York Times: OPEC Satisfied With Oil Prices

VIENNA, Austria (AP) — OPEC ministers on Wednesday spoke out against pumping more crude into world markets, suggesting they favored present levels — and prices — despite jittery stock markets and concerns about the health of the global economy.

Ahead of Thursday’s meeting by the 12 OPEC oil ministers, comments by the ministers of Nigeria and Kuwait reflected satisfaction on the part of the Organization of Petroleum Exporting Countries with present prices. While well off the record highs of over $78 last summer, a barrel of oil still costs around 40 percent more than in 2004.

Still, plunging stock markets have raised questions about the health of world economies, and with it the future prospects of strong crude demand, despite predictions that the world’s appetite for OPEC oil is on the rise. Any prolonged economic downturn would curb the world’s appetite for oil, and drive down prices.

Asian and European stocks fell Wednesday after Wall Street’s second-biggest point drop in four years rattled already nervous markets. The tumble came just as international markets were recovering from sharp declines earlier this month amid concerns about overvalued stocks and a U.S. slowdown.

With recent forecasts pointing to increased crude consumption, however, oil ministers appeared to favor keeping the status quo when they convene on Thursday.

Total OPEC output last month averaged 30.2 million barrels — 400,000 barrels less than OPEC should produce to meet world demand, said the IEA, the energy watchdog of the world’s major industrialized countries. And — barring the unexpected — consumption is set to increase with the approach of the high-demand North American summer driving season.

Two cuts in the past four months have contributed to relative stability that has kept crude between $50 and $60 a barrel. Still, with benchmark crude prices Wednesday below $60 — the red line for OPEC price hawks — OPEC ministers appeared to be in no mood to pump more oil.

”I will strongly argue against this,” said Nigerian Oil Minister Edmund Daukoru, when asked if the 12-nation organization would contemplate raising output.

On Wednesday, oil prices were down after U.S. petroleum inventory data showed an increase in crude stocks but declines in gasoline and distillate stocks, which include heating oil and diesel fuel. Light, sweet crude for April fell 29 cents to $57.64 a barrel on the New York Mercantile Exchange. April Brent on the ICE Futures exchange slipped 9 cents to $60.81.

Kuwait’s oil minister, Sheik Ali Al Jarrah Al Sabah, also said his country supported keeping output levels where they are, and Shokri M. Ghanem, head of the National Oil Corp. of Libya, also suggested OPEC would opt for the status quo.

Al Sabah suggested the group could act if supplies became scarce ahead of the driving season, telling reporters: ”If it’s tight, OPEC will fill any gap.” But he also refused to specify when any production increase could occur.

”I think they are all comfortable … because prices are at their acceptable level,” said independent oil analyst Kamel A. Al-Harami, former president of Q8, the retail arm of the Kuwait Petroleum Corp.

The 10 OPEC members bound by quotas agreed to total cuts of 1.7 million barrels a day in October and February. And while analysts say that the reductions have not been fully implemented, they have kept prices at levels OPEC feels comfortable with.

Iraq is not subject to the quotas. But raising hopes that the nation’s battered oil sector may be heading toward some stability, oil minister Hussein al-Shahristani told Dow Jones Newswires he has been in discussions with oil giants Royal Dutch Shell PLC and Total SA over developing the country’s vast oil resources, and that he expects a handful of projects to be put up for bidding later this year.

U.S. government officials and Iraqi politicians have hailed a draft law that would allow foreign investment into the politically charged oil sector, saying it would be a start to rebuilding a war-torn industry.

They also hope that new oil revenue, distributed among the country’s fractious regional, ethnic and religious groups, will underpin Baghdad’s shaky central government.

But oil company executives have said the legislation remains too ambiguous to trigger any meaningful negotiations between companies and government officials.

If passed, the initiative would legally permit some sort of foreign participation in the oil sector. That in itself would be a very big step, because the country’s oil wealth is politically sacred. The nationalization of the oil industry in the early 1970s under Saddam Hussein was a hugely popular move, and many Iraqis are still wary of foreigners exploiting their fields.

Published: March 14, 2007

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