OPEC agreed Tuesday to keep production quotas in place while pledging to increase oil output as needed to avert shortages caused by a war with Iraq.
Members of the Organization of the Petroleum Exporting Countries, which pumps a third of world supply, will wait until a war starts before boosting shipments. After two increases this year, the group's quota is 24.5 million barrels a day.
Oil prices have soared more than 50% to around $37 a barrel in trading at the New York Mercantile Exchange during the last year, increasing concern rising energy costs will slow economic growth worldwide. The surge in prices has fattened oil company profits and spurred investment in pipelines and fields, from Russia to West Africa.
"If you eliminate the drums of war, we will see oil prices fall to more acceptable levels," Saudi Oil Minister Ali Ibrahim Naimi said, adding that he wanted oil prices closer to $25 a barrel. "We will make sure the market has enough oil. We will not allow a shortage to emerge."
Oil prices fell for a second day after the OPEC announcement, dropping 55 cents to $36.72 a barrel on the Nymex.
OPEC met as the threat of war hung over its third-largest producer of oil, Iraq. Most OPEC members have increased oil production to their limits, with only Saudi Arabia able to ship significant amounts of extra crude. Qatari Oil Minister Abdullah ibn Hamad al Attiyah, OPEC's president, said members are ready to use any idle capacity during a war.
"We can bring this on stream in a short time," he said.
The Qatari minister also said OPEC should boost output before the U.S. uses emergency reserves.
Oil analysts and traders said prices may not fall much from current levels until the International Energy Agency, which represents 26 oil-consuming nations, or the U.S. tap their emergency inventories. The U.S. holds about 600 million barrels in reserve. They were amassed after the Arab oil embargo of 1973 to prevent shortages.
Iran's minister, Bijan Namdar Zanganeh, opposed an increase in quotas, saying supplies are now sufficient and such a decision would support nations who are seeking to attack an OPEC colleague.
"OPEC is not a political organization," the minister said. "It is a pure economic organization and it is not our mission to give a green light to any country to attack one of our members."
U.S. crude oil inventories have fallen to among the lowest levels of the last three decades as rising prices caused refiners to delay purchases.