OPEC ignores pleas to increase oil supply, hinting at future cuts
OPEC decided Friday against pumping more oil in a rebuff to Washington, a prelude to possible cuts as early as next month should the wounded U.S. economy lessen demand for crude.
The decision arrived despite U.S. urgings -- backed by other major consumers -- for more oil on the market to cool prices and relieve inflationary pressures that have contributed to fears of a global economic downturn.
In New York futures trading, light, sweet crude for March delivery fell $2.79 to $88.96 a barrel Friday after the United States said employers cut jobs in January, renewing worries that a possible recession could eat into oil demand as OPEC ministers suggested.
The 13-nation Organization of the Petroleum Exporting Countries insisted that supplies were adequate and that speculators and geopolitical jitters -- not oil availability -- were setting prices.
OPEC said it was focused on near-term expectations: the likelihood of decreased demand as the Western hemisphere’s heating season ends and before its summer driving season begins; the prospect of more barrels both from OPEC and non-OPEC nations; and fears that the market will shrivel if economic woes worsen.
“In view of the current situation, coupled with the projected economic slowdown . . . current OPEC production is sufficient to meet expected demand for the first quarter of the year,” read a statement from OPEC after a meeting of its ministers.
That left questions open about the second quarter, from April to June.
Although ministers avoided discussion of what OPEC would do during the next meeting on March 5, underlying sentiment for reducing output was apparent.
OPEC President Chakib Khelil told reporters that U.S. economic conditions “will probably have some impact on demand.”
Even before Friday’s meeting wound down, Iran’s oil minister, Gholam Hussein Nozari, told reporters: “We think there should be cutting in production.”
Venezuela, another OPEC price hawk, said it might follow Tehran’s lead.
The U.S. response to Friday’s decision was measured.
“Everyone is fully aware that having a reliable and steady and predictable supply of oil is a benefit to the global economy,” said White House spokesman Tony Fratto. “We hope that they understand that their decisions on oil production have a real impact on the economy,” he said.
But analysts suggested that OPEC could soon be pumping less oil, despite U.S. hopes.
“The likelihood that they will cut in March has just increased based on their rhetoric,” said Stephen Schork, whose Schork Report looks at energy markets. “I believe the producers think that the U.S. economy is in recession and they are anticipating a further cutback in demand.”
