OPEC Fails in Bid to Raise Prices : Supply: The cartel agrees to pump less crude, but cut is too little to affect world glut.
The Organization of Oil Exporting Countries agreed Friday to cut oil production modestly, but that wasn’t enough to emphatically strengthen prices.
The pact seemed yet another reflection of the cartel’s inability to overcome self-interest among members that collectively account for a critical portion of the industrial world’s oil supply. Even if the agreement works, the prospect of global production excess and falling prices remains strong.
“OPEC just did not cut enough,” said Victor Yu, an oil trader at Refco Inc., a leading commodities brokerage in New York.
The outlook for higher prices was further clouded by bellicose remarks from Iraq, which has been banned from the market as a result of United Nations sanctions after the Persian Gulf War.
Iraq’s oil minister, Osama Hiti, told reporters that other suppliers in OPEC should not attempt to undercut Iraqi crude sales with lower prices once his nation regains the right to export.
“If anyone tries to take advantage of even one barrel, I’ll produce to my full capacity,” Hiti said. “Seven dollars a barrel is better than none. Six dollars is better than none. That’s not going to matter to me at all.”
Oil contracts in London, the only key petroleum market operating during the Thanksgiving holiday, fell 41 cents for the week of the cartel’s winter meeting in Vienna.
The price of Brent crude for January delivery, a barometer of pressures on the overall market, managed a 20-cent rally Friday to close at $18.95. But part of the rally was rooted in the uncertainties surrounding a violent coup attempt in Venezuela, OPEC’s No. 3 producer.
Crude oil pumping by OPEC will fall from 25.3 million barrels a day to 24.9 million in early 1993, assuming OPEC members don’t cheat on their quotas, as they often have in the past.
The cartel had been discussing reductions that would have lowered the ceiling a bit further, but members failed to agree to big enough cutbacks.
For example, mega-producer Saudi Arabia said it will drop production from 8.4 million barrels a day to 8.395 million, erasing a mere trickle from the kingdom’s vast petroleum supply stream.
