OPEC Struggling With Drop in Oil Prices

Kuwait on Sunday blamed falling world oil prices on quota violations by some of its fellow OPEC members, as well as Asia’s economic crisis and Iraq’s possible return to the world market.

Oil Minister Issa al-Mazidi said a subcommittee of the Organization of Petroleum Export Countries will discuss the drastic slide in world crude prices at a meeting in Vienna this week.

He blamed the fall in prices on oversupply caused by:

* OPEC members selling more than their quota amounts.

* Weaker Asian demand due to an economic crisis.

* Iraq’s imminent limited return to world oil export markets under a deal with the United Nations.

* Adequate stock piles of industrialized states.

* A moderate winter in the Northern Hemisphere.

Although they will watch the subcommittee meeting, many oil analysts dismiss it as “theater,” saying that Saudi Arabia, the world’s biggest oil producer, will have to act alone and behind the scenes to prop up the price of oil.

“OPEC is no longer an effective organization to put a floor to the oil price,” said Fareed Mohamedi, an analyst with International Petroleum Co. in Washington.

“I expect the Saudis will move informally at first by quietly letting their traders know that they are tightening up on supply, which will in turn trickle into the market, giving a firm floor to the price,” Mohamedi said.

OPEC supplies about one-third of the world’s oil needs. At its November meeting in Jakarta, Indonesia, OPEC agreed to boost production targets by 10% to 27.5 million barrels per day.

Reflecting reduced oil prices in recent months, gasoline prices have been dropping in the U.S. “Tumbling seems to describe it for me,” industry analyst Trilby Lundberg said Sunday.

The average price of gasoline nationwide Friday, including all grades and taxes, was about $1.16 per gallon, down 2.7 cents in two weeks, according to the Lundberg Survey. Due to clean-air regulations and tighter refinery supplies, prices in California routinely exceed the national average.

Meanwhile, Saudi Arabia disputed allegations by Venezuela that Saudi producers were forcing prices down by violating their OPEC quota of 8.76 million barrels per day. The two countries are increasingly wrapped in a bitter battle for market share in the U.S., where Venezuela supplanted Saudi Arabia as the U.S.’ largest foreign provider.

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This report includes information from Bloomberg News, Reuters and Associated Press.