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OPEC Talks Expected to Yield New Freeze on Production Quotas

From Reuters

OPEC ministers on Sunday converged here for talks that are expected to lead to a freeze of existing output quotas for up to a year to try to support oil prices.

Talks opening Tuesday must also address the determination of the western African nation of Gabon to quit the Organization of Petroleum Exporting Countries, a threat that underlines the group’s failure through the 1990s to act as an effective cartel.

Gabon told OPEC leaders Saturday that membership is simply not worth the annual fee of $1.8 million, which the nation not paid for two years.

“OPEC is in a straitjacket,” said energy economist Geoff Pyne at banking house UBS. He said a cut in quotas would be the surest way to boost weak oil prices but that rivalries among the 12 members probably rule that out.

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An early arrival in Vienna who backed a quota freeze was Oil Minister Rakad Bin Salem Bin Rakad of the United Arab Emirates.

“We see it is best to freeze the current production ceiling for one year,” he told the UAE news agency WAM in Abu Dhabi.

The ceiling was set in 1993 at 24.52 million barrels daily, although cheating on quotas has lifted actual volume a million barrels in excess of that, Western monitors say.

Current prices hovering just less than $17 a barrel compare to an OPEC target of $21.

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