OPEC Backs Off Plan to Increase Production

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OPEC Backs Off Plan to Increase Production Tulsa World BLOOMBERG NEWS

August 03, 2000

CARACAS, Venezuela -- OPEC's top official said Tuesday he has told member nations to cancel plans to raise output for a third time this year because crude oil prices fell more than 10 percent last month.

OPEC president Ali Rodriguez, who also is Venezuela's oil minister, in a letter distributed to other members ordered the extra supply be canceled. Rodriguez on July 17 proposed the increase, as long as prices stayed above targets agreed upon by the Organization of Petroleum Exporting Countries.

"I wrote to express my concern about inventories and also to tell members that there is no boost in production since the terms were not met," Rodriguez said.

The order reinforces expectations that the 11-nation group, which pumps 40 percent of the world's oil, may delay raising official output quotas further until at least after their Sept. 10 meeting. Saudi Arabia, OPEC's biggest member, has indicated it will unilaterally raise production this month, refiners have said.

"Oil prices aren't too high, they're fair," said Venezuela President Hugo Chavez during a news conference. Chavez and Rodriguez are scheduled to start a tour of OPEC capitals Monday.

OPEC informally agreed in June to raise daily supply by 500,000 barrels, or 0.7 percent of world output, if the price of its oil index topped $28 for 20 consecutive working days.

"This defers any collective action by OPEC," said Julian Lee, senior energy analyst at the Centre for Global Energy Studies in London, who said Saudi Arabia appears to be acting independently of its colleagues.

With the index above $28 from July 1, Rodriguez told members in a July 17 letter to prepare for an increase by the end of July. Yet the price later fell below $28, which oil ministers said canceled the plan.

OPEC's oil-price benchmark last stood at $25.17, close to the $25 a barrel level that Saudi Arabia and other OPEC members have targeted. It has fallen 17 percent from $30.49 at the beginning of July.

Analysts speculate that Saudi Arabia will press ahead this month with a plan to pump extra oil in defiance of official quotas.

"There seem to be indications Saudi Arabia will open the taps in August," Lee said.

http://denver.petroleumplace.com/egatecom/scream/2000/08/02/TUL/0000-1739-KEYWORD.Missing.html

-- Martin Thompson (mthom1927@aol.com), August 04, 2000


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