Oil Tops $30 a Barrel as Cuts in OPEC Production Loom

Oil prices on Friday topped the $30 threshold for the first time in a month as U.S. efforts to talk the OPEC cartel out of making deep production cuts appeared to fall on deaf ears.

February crude on the New York Mercantile Exchange jumped 64 cents to $30.05 a barrel, taking gains to 12% so far this year as senior OPEC officials said the group was on course to reduce output when it meets next week.

“I think there is still a consensus in OPEC for a cut,” said OPEC President Chakib Khelil of Algeria, speaking upon his arrival in Vienna for OPEC’s conference, which will be held Wednesday, after meeting earlier Friday with U.S. Energy Secretary Bill Richardson.

The Organization of Petroleum Exporting Countries is widely expected to agree to cut 1.5 million barrels per day, or more than 5% of its output, in a move that some analysts say risks further stifling global economic growth by sparking a rebound in energy costs.

OPEC price hawks Kuwait and Qatar want even stiffer cuts of as much as 2 million barrels a day.

“We have a consensus for a cut, but how much will take a decision in the conference,” said OPEC Secretary-General Ali Rodriguez in Vienna.

President-elect George W. Bush, who takes over the White House three days after OPEC meets, warned the group to be careful and said he has spoken with some of the heads of producer nations.

“The message is to remember that to the extent energy prices do impact economic growth, that would affect markets. OPEC ministers ought to be mindful of economic vitality,” the Wall Street Journal quoted Bush as saying.

Richardson has begun a final lobbying tour of six OPEC oil members, including Saudi Arabia, to try to convince the cartel not to cut output too sharply.

Richardson said the U.S. and the European Union are more comfortable with prices of $25 to $26 a barrel and that “$30 is not an acceptable price . . . nobody should be comfortable with that.”

While oil prices topped $30 a barrel in the United States on Friday, the basket price for oil produced by OPEC members was significantly cheaper at about $24. Saudi Arabia has said it aims for an oil price at about $25 a barrel.

Washington fears that the cartel may compound damage done last year, when four increases in output, totaling 3.7 million barrels a day, came too late to prevent prices spiking to 10-year highs.

But worries over slowing demand in the United States and abroad are encouraging OPEC producers to cut back production before prices fall too far, as they bid to avoid a repeat of 1998’s damaging price crash.

Sustained high crude prices have been the backdrop for a series of economic shocks during the last year, first with gasoline prices spiking to all-time highs, then winter natural gas and heating oil bills soaring.

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Oil Up

Oil prices closed above $30 a barrel Friday for the first time since Dec. 4 on fears of OPEC production cuts.

Near-term oil futures in New York, weekly closes and latest,

per barrel

Friday: $30.05, up 64 cents

Source: Bloomberg News