OPEC agrees to another
production boost
by Paul Watson
& Nancy Rivera Brooks
September 10, 2000
Los Anizeles Times
VIENNA. Austria - OPEC ministers
agreed Sunday to let 800,000 more
barrels a day flow into price -shocked
world markets, hut analysts said con
sumers should expect little immedi
ate relief at the gas pump or in this
winter's heating oil hills.
The White House reacted with tem
pered enthusiasm, praising the action
by the 11 -member Organization of
Petroleum Exporting Countries while
watching to see what impact it will
have on crude oil prices that are as
high as those seen during the Persian
Gulf crisis in 1990 and on U.S. in
ventories of heating oil and gasoline,
which are running perilously low.
Most energy market analysts see
the cartel's production boost, the third
this year, as a bit of sleight-of-hand
that allows OPEC to claim it is help
ing angry oil-consuming nations but
really brings only about 2110,000 new
barrels of oil a day to market, given
the current cheating on production
quotas by OPEC members.
"All this is not anything really sig
nificant," Leo Drollas, deputy direc
tor of the London-based Centre for
Energy Studies, said. "It's like setting
up a drip feed, slowly bringing on this
tiny amount of excess barrels."
To get a substantial drop in oil
prices, I million to 1.5 million addi
tional barrels of oil a day are needed,
many market watchers say. But a
growing group of conirarians - includ
ing within OPEC-fret that some of
the usual indicators are out of whack,
masking a building wave of oil that
will swamp the industry, causing
crude prices to plummet.
The oil ministers didn't formally
announce the 500,000-barrel increase
after their Sunday meeting, from
which they rushed to a lavish dinner
honoring OPEC's 40th anniversary, at
Vienna's historic City Hall. But an
OPEC official confirmed to reporters
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that a deal had been i !led
the details would he laid
conference Monday."l he
also agreed to meet itilinn N I 2 10
review production \ CI,
Boosting output to 2() 2
rely a day hei_.iinning itinc.cin
an approximately 3 pck.cut
for 10 of ()PLC's inclohyi ,otcl!;ic
The I Ith member.
about 2.5 million hariel , .1 ,1:1\
under U.N. sanction,,
Roughly 76 million bane!,
consumed around the vv,,rld c.,1,..11
Mexico and Oman. ke oil Innl is
ing allies of OPEC, 1,0111
Would increase oil prrdu..tion\kt)
did not specify an amount and (
said it Would add 20.11( to to it i i tit
barrels a day.
OPEC has been lobbied intense' \
in recent weeks hs the United
which uses about a (Itlttl !CI ttt the
world's ()11, and other nation, bitti-,t
production so that oil price, will tall
The U.S. benchmark pi ice on the
oil futures market. \Vest levat, ;loci
mediate
light sweet rude. it I tp ot t ti
a barrel on the Nei Yolk Nici, ant le
Exchange last Thursday. up more 111,11!
40 percent since the
of lie
year. Gasoline prices remain:kJ
stubbornly high and \\ inter sit}, [spilt,
of home heating oil ate louverthan
they have been in 2-4 sear. \Attic') k ill
bring high prices and pi.t-ible gimd
uct shortages in the I ti-t \\ hen old
weather hits.
Clinton discussed Ith
Saudi Arabia's Cri \\ n inL \
Bin Ahdel ;\/ii List 11c In la,
I.J.S.Fnerg\ Secretar\ Bill i i• It;uJ~ni
declared that the Cniicil oidd
like to see oil bet \\ $2l) wit!
$25 and that recent priLe , in the I
a-barrel neighborhood ept
ably high.-
Concerned thm ()11 1);
reunite milatitm hllll LI
norui\:
European and Asian count; lc, ,ilso
urged OPEC action Coustimci ,in et
Was dramatically illuswitcd by Wel
protests across Furope. in(
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While applauding OPEC's new
quota increase, the White House said
th e impact o f the move is uncertain
"We've got to digest what they've done
today, - said White House Chief of
;i;itt John Podesta on " Fox News Sun-
"We're going to take a hard look to
see whether it's enough."
The OPEC increase looks good on
paper, but it probably amounts to no
'note than 200,000 barrels a day in re
ality, several oil industry analysts said.
Chronic quota cheating by OPEC's
meinhers means that the Saudis. the
cartel's largest producer, "have to cut
!vigil their current production to meet
their new target, which shows you how
sill \ it is," Drollas said.
'onsumers hoping for cheaper gaso-
I Inc or home heating oil won't get
much. if any. relief from OPEC's lat
est move, said William Edwards, presi
dent of the Texas-based Edwards En-
Consultants.
'1 hey will get it eventually, hut not
!hi. \ ear, - Fdwards added.
'ontrarian cuices insist that key sup
and demand indicators don't add
Respected oil analyst Frederick P.
cutler of Bear Stearns wrote in a re
port released Wednesday that nearly
25 . 0 million barrels of oil are "
based on world supply and de
niand figures, oil tanker chartering ac
vity and oil company inventory re-
" We think there is a lot of oil in Asia
And on the water. And it's coming here
next." I.culfer wrote. " We continue to
think (the price oft oil is headed for a
tunthle.-
()Hl' officials again blamed high
eii\ eminent taxes in consuming coun
; les ;is the main reason for the soaring
gas and home heating oil. Last
in the United States, taxes added
;in eragc of $13.80 to a barrel of oil
that OPEC sold for $16.90, according
(,) an OPEC pamphlet published this
July.
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