OPEC Keeps Output the Same

OPEC agreed to keep oil output at current levels while ministers assess the implications of a slowing world economy and this month’s terrorist attacks in the U.S., Libya’s top delegate to the cartel said Wednesday.

There will be “no production change,” said Libya’s chief representative at the meeting, Ahmed Abdulkarim Ahmed. Analysts had widely expected the cartel to hold production at current levels.

Ministers of the Organization of Petroleum Exporting Countries will meet formally this afternoon at its Vienna headquarters to ratify their production decision, said Abdullah ibn Hamad al Attiyah of Qatar.

“OPEC is in a bind, because they can’t cut supply as they would normally,” said Jeff Currington of Morley Fund Management in London. “There will be a deeper recession than we thought before the attacks, and demand for oil will fall.”

With ties to the prime suspect behind the attacks, Osama bin Laden, Saudi Arabia may be reluctant to sell less oil to the U.S., the world’s largest oil-consuming country and a military ally, analysts said. Bin Laden was exiled from Saudi Arabia and is thought to be in Afghanistan.

Crude oil futures in New York and London have fallen sharply since the attacks, as traders are concerned that the U.S., which consumes a quarter of the world’s oil, will enter recession and that demand will take a further hit because of sharply reduced air travel.

On Wednesday, West Texas intermediate crude, the U.S. benchmark, rose for the first time in seven sessions, closing 57 cents higher at $22.38 a barrel on the New York Mercantile Exchange. During the day, oil for November delivery fell as much as $1.51 to $20.30, the lowest since August 1999.

OPEC’s own price index fell Tuesday, the latest day for which data were available, to $19.87 a barrel, below the group’s official target of $22 to $28.

Energy usage is slowing in the wake of the terrorist attacks as airlines, which use 8% of the world’s fuel, slashed flight plans and some economists concluded that a U.S. recession has begun. As all forms of travel slowed, U.S. gasoline inventories last week posted their largest gain in more than two decades, a report from the American Petroleum Institute showed.

OPEC ministers dismissed the recent price swings as a knee-jerk reaction by speculators, rather than a reflection of oil supply and demand. Oil has fallen by 19% in New York since the Sept. 11 strikes.

The Saudi oil minister, Ali Ibrahim Naimi, insisted that OPEC will maintain its price target of $22 to $28 a barrel and said the group will rein in supplies under this year’s earlier production-cutting accords in a bid to return oil prices to about $25 a barrel.

“Compliance always improves when there is a concern for prices,” Naimi said Wednesday in Vienna. “We have a definite objective of a stable market, a $25 price.”

The cartel has a production target of 23.2 million barrels a day, about 30% of current global demand.