OPEC unexpectedly keeps lid on oil production *updated*


Associated Press

VIENNA — OPEC unexpectedly decided to leave its production levels unchanged on Wednesday, with senior officials saying their meeting ended in disarray — a stunning admission for an organization that places a premium on consensus decision making.

OPEC officials said the lack of agreement meant that OPEC will maintain present output ceilings with the option of meeting within the next three months for a possible production hike.

“We are unable to reach consensus to … raise our production,” OPEC Secretary General Abdullah Al-Badri told reporters, in comments reflecting unusual tensions in the 12-nation Organization of the Petroleum Exporting Countries.

Analysts covering OPEC for more than 20 years said they could not remember any other time that the normally closed group had admitted to such divisions in its ranks.

Oil prices surged on the news. Benchmark crude for July delivery was up $1.25 to $100.34 per barrel in morning trading on the New York Mercantile Exchange after trading lower ahead of the OPEC meeting.

Saudi Arabia and other influential Gulf nations had pushed to increase production ceilings to calm markets and ease concerns that crude was overpriced for consumer nations struggling with their economies. Those opposed were led by Iran, the second-strongest producer within the Organization of the Petroleum Exporting Countries.

While the Saudis and the Iranians are frequently at loggerheads over pricing, past meetings normally fell in behind Saudi Arabia, which produces the lion’s share of OPEC output. But this time, the Saudi-Iranian rivalry combined with major political and economic uncertainties to lead to deadlock.

Among the biggest worries is that unrest in Libya and Yemen could destabilize larger oil-producing nations in the region. The two countries normally produce less than 4 percent of the world’s oil needs, and Saudi Arabia and others have boosted output to make up for much of the shortfall.

But while the Saudis have served notice that they are ready to further increase supplies to help compensate for the loss of the daily 1.6 million barrels normally brought to the market by Libya, other OPEC nations — already pumping close to capacity — cannot contribute much. This appeared to have fueled the strong opposition to an output ceiling hike.

Global economic weakness is also worrying producers and consumers.

Weak housing and employment reports from the United States added to the gloom spread by Europe’s attempts to bail out governments and Japan’s post-Fukushima meltdown. At its present price of around $100 a barrel, benchmark crude may be too expensive for nations struggling to make ends meet, worsening the economic picture and leading to less oil demand.

But with sputtering economies using less energy, raising output to lower prices also risks flooding the market, leading to a surplus that could drive prices below $80 a barrel. Even that benchmark, which is preferred by the Saudis and other moderate OPEC members, is considered too low by price hawks Iran and Venezuela.

Tuesday’s sober assessment of the U.S. economy from Federal Reserve chairman Ben Bernanke added to concerns, especially as the central banker failed to indicate that more monetary stimulus was likely.

“Despite all their efforts, the Saudis were not able to convince Iran and other countries to increase production,” said Ehsan Ul-Haq, an analyst with KBC Energy Economics. “ It means there is a huge disagreement — but it also means that it gives the Saudis free space to do what they like.”

Categories: Social
Associated Press

8 Responses

  1. babydolly says:

    I’d love nothing more than to tell the Saudi’s eat some sand and put THAT in the bank. We do need to become self sufficient and provide our own oil and jobs ~ ASAP.

    Regardless of any rebates, I will never buy a VOLT and evidently most of the country is not interested in them either. The VOLT is the new Edsel. My guess is the president is just pushing them to make his union buddies happy that make the VOLT and garner their votes again. Hurry up, 2012, for our “hope and change” back!

  2. scott38 says:

    Too bad we couldn’t use the threat of increased US extraction and exploration as a tool to encourage OPEC to increase output, or to decrease the price of a barrel of oil.

    Or, crazy thought here, utilize all of our own resources instead of relying on people that hate us for our energy needs?

  3. ThomasPaine says:

    Thank you, Obama, and can I have another?

  4. ntangle says:

    he should concentrate on paying back the taxpayers that bailed GM.
    since the US Treas’ only remaining stake in GM is as a minority shareholder, how does marketing Volts & other GM models conflict with that goal?

  5. Neil says:

    It figures that Iran and Venezuela would be leading the
    opposition. They are raking in stupidly high prices for
    their crude oil and have no interest in seeing our economy
    improve. For them staying put is a win-win situation.

    Now more than ever it is both an economic stability and a
    national security issue that the US works toward energy
    independence. We seriously need to wake up here. I would
    love to see the day when we can tell the Saudis precisely
    what they can do with themselves, but our politicians do
    not have the will to do what is best for the country at the
    risk of offending them.

  6. Mark from Louisiana says:

    The CEO of General/Government Motors is calling for a $1 a gallon gas tax….to encourage consumers to buy fuel efficient cars…aka Chevy Volt.
    I think he should concentrate on paying back the taxpayers that bailed GM.

  7. KevinInSpring says:

    I love this blog.

    OPEC’s targets are just symbolic – everyone knows that each country produces whatever it wants. And the only one that matters to the world price is Saudi Arabia. No other supplier can change the world price of oil.

    @CaptSternn – The real facts are that there is not enough *economically viable* petroleum in the US to shake the Saudis’ domination of the market. It’s not a Republican or Democrat issue – we could open every square inch for drilling, but if the price isn’t right, the oil is staying in the ground. And the high prices required to extract from shale and sands would surely hurt the economy more than $80 oil from the Saudis. Domestic drilling is not a panacea for our economic woes, which are mainly caused by politicians of all stripes spending more than is being brought in.

  8. CaptSternn says:

    We need more domestic drilling and production in the U.S. and off our shores to make OPEC irrelevant. Canada and Russia have already done their parts, now we need to step up. We have a 300 year supply right under our feet. But doing so would create millions of good paying jobs, increase national security, boost the economy and eliminate the trade deficit. Liberals and democrats would never go for those things.