OPEC cuts crude oil output; gas price hike likely to follow

14 years ago Comments Off on OPEC cuts crude oil output; gas price hike likely to follow

VIENNA, Austria (AP) – OPEC will cut its production target by 4 percent as scheduled, several oil ministers said Wednesday,a move that analysts say could drive crude oil prices higher even as U.S. customers are already facing high gasoline prices.

The Organization of Petroleum Exporting Countries, which pumps about a third of the world’s oil, will reduce its output ceiling by 1 million barrels per day.

A recent surge in oil prices had led some of the group’s 11 members to suggest postponing the cut, but OPEC’s most influential oil minister, Saudi Arabia’s Ali Naimi, prevailed in his effort to press ahead.

The rise in crude prices has seen gasoline prices climb to record levels in the United States. The nationwide averaged rose to $1.80 a gallon, according to the latest Lundberg survey of 8,000 stations across the United States.

Kuwaiti Oil Minister Ahmad Fahad Al-Ahmad Al-Sabah had earlier suggested delaying the cut but was among those who confirmed the group’s decision to trim its target to 23.5 million barrels per day starting Thursday.

Ministers from Algeria, Nigeria, Libya and Qatar also confirmed the agreement, which the representatives reached in private talks ahead of a formal meeting at OPEC’s headquarters in Vienna.

OPEC had agreed last month in Algiers, Algeria, to make the cut on April 1, but recent discomfort with rising prices in the United States and other importing countries had led some OPEC members to reconsider.

“We made decision to apply the Algiers decision. We’re going to meet again in June … and at that time we’re going to review the market,” Algerian Oil Minister Chakib Khelil told reporters.

OPEC was forced to balance consumers’ desire for lower oil prices with its own fears that swelling inventories and a seasonal lull in springtime demand could cause prices to plunge.

Most OPEC members are taking advantage of the current high prices by pumping as much oil as they can. Excluding Iraq, which doesn’t participate in the group’s quota agreements, OPEC is already exceeding its target by an estimated 1.5 million barrels.

If individual members have the discipline to reduce their actual output in line with their lower target, crude prices now could reach $40 per barrel, said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.

That could damage the global economy and the long-term demand for oil, other analysts have warned.