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News > International
OPEC holds output quotas
November 13, 2000: 9:11 a.m. ET

Cartel leaves exports on hold, to meet in January to consider possible cut
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LONDON (CNNfn) - OPEC ratified an agreement to maintain members states' existing export quotas Monday and said it would meet in January to consider if any action is needed to head off a sharp fall in oil prices as winter demand for fuel fizzles out.  

OPEC President Ali Rodriguez said that even if prices stayed at current levels of more than $30, OPEC could not necessarily bring them down by raising output. He reaffirmed the cartel's commitment to its aim of keeping oil prices within a price band of $22 to $28 a barrel.

"We can only conclude that OPEC has more than fulfilled its role as a reliable oil supplier and that the true reasons for currently high prices lie behind a series of other factors," said Rodriguez.

The cartel blamed shrinking refining capacity in the United States, the world's biggest importer, as a key factor for sky-high oil prices.

"The feeling we have now is that the market is getting perhaps a little saturated and as stocks build up it is likely to hit us in the face in the New Year if we don't watch it," said cartel secretary-general Rilwanu Lukman. graphic"We do not want to overdo it and put the market in a state of jeopardy."

The 11-member cartel is now pumping 29.5 million barrels a day, while U.S. refinery capacity had fallen by 2.7 million bpd between 1981 and 1999, Rodriguez said.

Brent Crude for December delivery rose 21 cents to $32.23 on London's International Petroleum Exchange.

"There is an acute shortage of product (from refineries) and this is drifting back into the futures market," Peter Hitchens, an analayst at Williams de Broe, told CNNfn.com. "But OPEC is passing the buck for high oil prices, it doesn't want to be held responsible for a possible worldwide recession."

The oil cartel, which pumps about 40 percent of the world's oil, plans to meet Jan. 17 to review output levels. A formal meeting scheduled for Sunday was delayed until Monday as a mark of respect following the Austrian ski train tragedy on Saturday.

International political pressure has forced the oil cartel this year to boost oil production by more than 3.7 million barrels a day, in a vain attempt to deflate oil prices that have risen to 10-year highs.

OPEC members are concerned four production hikes this year might herald a sharp fall in prices early next year, when the current winter demand for heating oil in the Northern hemisphere dries up. The Organization of Petroleum Exporting Countries effectively suspended its price mechanism.

graphicOil prices have stubbornly stayed above $30 barrels, despite the cartel's agreement to pump an extra 500,000 barrels on Oct. 30. Under the current price mechanism the cartel should increase output in 20 business days,  although analysts don't expect a hike.

Under its price mechanism adopted in March, if the average price of OPEC's benchmark basket of different oil blends remains above $28 for 20 business days an increase automatically follows. OPEC can also reduce output by 500,000 barrels a day if oil prices stay below $22 a barrel for 20 days.

UAE Petroleum and Mineral Resources Minister Obald bin Said al-Nasseri said OPEC will review its price band mechanism in January and "see if we need to modify it."

The cartel is concerned a fall in demand and will see prices plummet. It was badly caught out by the Asian financial crisis in December 1998, when oil hit a low of $9.95 a barrel on Dec. 11, 1998. A year earlier OPEC had raised output to meet demand from booming economies in the region.

OPEC in early 1999 agreed to restrict production, resulting in a tripling in the price of crude over the following year.

On Sunday, Venezuela's Rodriguez emerged as a last-minute compromise to replace Rilwanu Lukman as the cartel's secretary-general after the failure to select from candidates put forward by Iraq, Iran, Saudi and Libya.

Venezuelan President Hugo Chavez will name a new Venezuelan oil minister in due course. Algeria's Khelil takes over as OPEC president from Jan. 1.

--from staff and wire reports graphic

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