Opec cuts output despite west’s pleas

Financial Times: Opec cuts output despite west’s pleas

By Carola Hoyos and Javier Blas in London
Published: April 12 2008 02:52 | Last updated: April 12 2008 02:52

The Organisation of the Petroleum Exporting Countries has quietly begun to reduce its oil production despite calls from the US and Europe for the group to pump more so that prices fall.

Output from the core countries of the 13-member cartel last month fell to 27.3m barrels a day, down from the 27.6m b/d they produced in February and 27.8m b/d in January, the International Energy Agency, the western countries’ watchdog, said on Friday in its monthly report.

Production from Saudi Arabia, Opec’s largest member, dropped marginally from January and was the same as February at 9.2m b/d.

The cuts come despite assurances from Opec ministers that they were keeping their output steady.

Ali Naimi, Saudi Arabia’s powerful energy minister, said this week: “I am not going to pull back. I’m not going to dump crude on the market.”

Opec will have to defend the conflicting data at a meeting in Rome next week, where energy ministers of the world’s biggest producing and consuming countries will gather.

Some of the drop in supply was linked to field maintenance and pipeline outages in Nigeria and Iraq, the IEA’s report noted. But it warned that the trend of Opec tweaking its supply to keep prices high could deepen in coming months: “Seasonal demand downturn in the second quarter may highlight differences between official pronouncements [by Opec] and actual output.”

Analysts said Opec’s tight-fisted approach was one element driving up the price of oil, which hit a record $112.21 a barrel on Tuesday and was trading at $109 a barrel on Friday.

But Opec ministers are concerned about the slowdown in demand in the US, where drivers are using less petrol because of high prices at the pump and the country’s overall economic slowdown. The US Department of Energy recently underscored this trend, by forecasting that petrol demand in the US would fall this summer for the first time since 1991.

The IEA on Friday cut its forecast for global oil demand this year by a large 360,000 b/d to an average of 87.2m b/d.

Oil used for heating is also likely to find fewer buyers in the coming months as the western hemisphere’s winter comes to an end, Opec ministers argue. The weak dollar is also attracting speculators into oil, driving up the price, they say.

But the IEA warned that the world would need Opec’s oil, as strong demand from Asia’s booming economies was likely to counterbalance the drop in US demand.

Copyright The Financial Times Limited 2008

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