OPEC Continues Output Cuts
OPEC agreed on Friday to keep a cap on oil output for three months. The cartel is seeking to cement the price of its export basket in a $22-$28 a barrel range and wait for a global economic revival to lift demand for its oil. "The price has only just entered the lower end of our band and we hope it moves higher as the economy recovers," said Venezuelan Oil Minister Alvaro Silva.
Oil prices have risen sharply in recent weeks after a fourth quarter slump, spurred higher by signs of an economic upturn and fears that the United States might target OPEC member Iraq for military action. OPEC, planning to meet again in mid-June, is sending mixed signals about policy intentions for the second half of the year.
OPEC restrictions limit its 10 member nations to 21.7 million barrels daily, leaving more than five million barrels a day of idle capacity on the 75 million bpd world market. That leaves plenty of cover for any loss of output from OPEC member Iraq if Washington widens its war on terror to take military action against Baghdad. Iraq pumps some 2.5 million barrels daily in an exchange for humanitarian goods monitored by the United Nations, still enforcing sanctions imposed after Baghdad's 1990 invasion of Kuwait.
OPEC has persuaded independent producers that joined its supply management campaign last December to stay on board for another three months. Ministers are confident Russia will match Mexico, Norway and Oman in agreeing to keep a lid on output.