Rebuffing pleas from the U.S., OPEC said Wednesday that it would press ahead with plans to immediately cut crude oil production by 4%.
But instead of rising, oil prices fell amid doubts that the cutback would materialize and reports of larger-than-expected U.S. oil inventories. The benchmark grade closed at $35.76 a barrel, down 49 cents on the New York Mercantile Exchange.
Organization of Petroleum Exporting Countries ministers agreed to trim members’ production quotas starting today by a total of about 1 million barrels, to 23.5 million barrels a day. Plans for the reduction were announced in February, but with prices hovering around 13-year highs and intense pressure from the U.S., some had hoped OPEC would abandon the move.
For motorists in California, who are paying an average $2.129 for a gallon of regular gasoline, whatever OPEC does might make little difference. Analysts said pump prices were more likely to be affected by regional market issues, such as troubles at refineries that are running at near capacity, as many are across the country.
With the summer driving season coming up, any glitch could cause troubles. One occurred Tuesday evening, when there was an explosion and fire at BP’s massive refinery near Houston.
“It’s not going to be about crude oil in the next six months. It’s going to be about gasoline” supplies, said Tom Kloza, chief oil analyst at the Oil Price Information Service, which tracks oil and gasoline markets.
In the West, gasoline inventories have taken a dive, and wholesale fuel prices in Los Angeles have headed upward, rising 25 cents a gallon in 10 days.
Retail gasoline prices hit a record national average Tuesday of $1.753 for a gallon of regular, according to AAA. On Wednesday, the average ticked down to $1.752 nationwide; California’s average had reached a record $2.18 on March 6.
At the OPEC meeting in Vienna, Saudi Arabia’s oil minister, Ali Ibrahim Naimi, defended the group’s decision.
“More oil now will make a glut in the market and force prices to collapse, something we don’t want,” he said. “Throwing more oil on the market would be destructive for everybody.”
U.S. politicians blasted OPEC’s action as a threat to the economy and a slap to American consumers.
“Today OPEC sent a message, and it was not a very friendly message to the United States,” said Phil Flynn, a senior oil analyst at Alaron Trading in Chicago. The message “is that high oil prices are going to be here to stay for a while.”
In Washington, where Congress has been getting an earful from people angry about soaring pump prices, Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Energy and Natural Resources Committee, said OPEC’s decision revealed “unbridled greed and a callous disregard for the domestic economies of its customers.”
A White House spokesman, noting that President Bush was disappointed by OPEC’s decision, said, “It is important for producers not to take actions that harm American consumers and our economy.”
Administration officials were leaning on Kuwait and other allies to keep oil production up, according to sources.
Democratic presidential hopeful Sen. John F. Kerry (D-Mass.) said the Bush administration had let fuel prices spiral out of control and “squandered America’s ability to do anything about it” by straining relations with Arab allies.
Kerry, along with Sen. Barbara Boxer (D-Calif.) and others, urged the president to stop buying oil to fill the nation’s Strategic Petroleum Reserve.
For its part, the Bush administration, joined by Domenici, seized the opportunity to push the long-stalled energy bill to allow more oil drilling in wilderness areas. And Sen. Jeff Bingaman (D-N.M.), the energy panel’s ranking Democrat, made the case for reducing the number of different fuel formulas in the country, which some believe contributes to higher pump prices.
OPEC members produce about one-third of the world’s oil and regularly surpass their established production quotas. “The group will not adhere to these cutbacks” given the high prices on world markets, said oil analyst Bruce Lanni of A.G. Edwards.
Oil prices have been above $30 a barrel for most of the last five months, peaking Feb. 17 at $38.18 on NYMEX.
On Wednesday, traders at one point sent prices down $1.40, on news that U.S. stockpiles had grown to their highest level since August 2002, larger than expected.
Times staff writer Richard Simon contributed to this report.