DENPASAR, Indonesia -- Cash-strapped OPEC producers were all smiles Tuesday after clinching an agreement to freeze 1995 oil production and resolving the politically thorny issue of picking a new secretary general.
Both decisions were backed by all 12 cartel members and oil traders rewarded OPEC for its rare display of unity by adding 30 cents to the oil price since Friday.
"This (production) agreement is expected to raise oil prices gradually but not to the OPEC target level of $21 per barrel," OPEC president and Indonesian Oil Minister Ida Bagus Sudjana told reporters.
When asked if the deal could push oil prices to $18 or $19 per barrel Sudjana said, "I hope so."
OPEC has kept its production ceiling at 24.52 million barrels per day since September 1993, but oil prices have continued to slide due to higher non-OPEC production, OPEC quota cheating and fears that Iraqi oil exports will resume.
By capping its oil output next year, OPEC is hoping that rising world oil demand will once again pull prices higher.
Libyan Oil Minister Abdalla Salem El-Badri said he expected world oil demand to rise 700,000 bpd this year to about 66 million bpd and climb another 1 million bpd in 1995.
Oil prices now are little better in real terms than they were before the Arab oil embargo of 1973.
Slumping markets have chopped OPEC's oil earnings by more than half since 1980, when the group held the world to ransom with high oil prices.
Even mighty Saudi Arabia, the world's largest and richest oil producer, has had to pinch pennies to meet budgets and pay off Gulf War debts.
Influential Saudi Arabian Oil Minister Hisham Nazer said he was happy with the new deal and hoped prices would rise.
Nazer said he thought prices would rise because "we think demand is good in the market."
But he added OPEC was concerned about non-OPEC oil production, which has been rising rapidly in the last few years. Further increases in non-OPEC output next year could curb the price gains OPEC is counting on.
Oil traders are also worried about abnormally mild weather so far in the United States, Europe and Japan. A mild northern winter could leave world refiners with glutted inventories in the spring and the excess crude could weigh on oil prices for much of next year.
"OPEC is on a bit of a honeymoon now with world oil markets because they have settled their differences so easily," one oil trader in Singapore said.
"Oil prices will rise for a while but then stop and wait to see how the winter is and if there is excess non-OPEC and OPEC production."
Several OPEC members said they were also still concerned that some OPEC members were cheating on their assigned output quotas. Nigeria, Venezuela and tiny Gabon are all believed by outside sources to be exceeding their limits.
Most OPEC members are now pumping full out, with the exception of Saudi Arabia, but oil traders will be watching in coming weeks to see if higher oil prices prompt some to milk their wells a little bit more.
"There are a great many members, including Saudi Arabia, who are very much keen on abiding by the quota," Saudi's Nazer said. Libya's oil minister later added OPEC has some proposals to deal with overproduction but he would not specify them.
OPEC members did not discuss the issue of reintegrating Iraq into world oil markets when United Nations sanctions are removed, OPEC delegates said.
Iraq, once the world's sixth largest oil producer, said once the U.N. export ban is lifted it will ask OPEC for permission to pump oil at will until it reaches parity with rival Iran.
Most analysts do not expect UN sanctions on Iraq to be lifted in 1995 and possibly even 1996, but oil markets remain nervous that its return will flood world oil markets.
Just as challenging for OPEC was resolving the touchy political issue of who would be the new OPEC secretary-general. Iran, Nigeria and Venezuela put forward candidates and no one wanted to budge.
Iran and Venezuela blocked each other at the last OPEC meeting, but both made unusual concessions here, paving the way for Nigeria's Rilwanu Lukman, past oil minister and OPEC president, to take up the post.
Both decisions were backed by all 12 cartel members and oil traders rewarded OPEC for its rare display of unity by adding 30 cents to the oil price since Friday.
"This (production) agreement is expected to raise oil prices gradually but not to the OPEC target level of $21 per barrel," OPEC president and Indonesian Oil Minister Ida Bagus Sudjana told reporters.
When asked if the deal could push oil prices to $18 or $19 per barrel Sudjana said, "I hope so."
OPEC has kept its production ceiling at 24.52 million barrels per day since September 1993, but oil prices have continued to slide due to higher non-OPEC production, OPEC quota cheating and fears that Iraqi oil exports will resume.
By capping its oil output next year, OPEC is hoping that rising world oil demand will once again pull prices higher.
Libyan Oil Minister Abdalla Salem El-Badri said he expected world oil demand to rise 700,000 bpd this year to about 66 million bpd and climb another 1 million bpd in 1995.
Oil prices now are little better in real terms than they were before the Arab oil embargo of 1973.
Slumping markets have chopped OPEC's oil earnings by more than half since 1980, when the group held the world to ransom with high oil prices.
Even mighty Saudi Arabia, the world's largest and richest oil producer, has had to pinch pennies to meet budgets and pay off Gulf War debts.
Influential Saudi Arabian Oil Minister Hisham Nazer said he was happy with the new deal and hoped prices would rise.
Nazer said he thought prices would rise because "we think demand is good in the market."
But he added OPEC was concerned about non-OPEC oil production, which has been rising rapidly in the last few years. Further increases in non-OPEC output next year could curb the price gains OPEC is counting on.
Oil traders are also worried about abnormally mild weather so far in the United States, Europe and Japan. A mild northern winter could leave world refiners with glutted inventories in the spring and the excess crude could weigh on oil prices for much of next year.
"OPEC is on a bit of a honeymoon now with world oil markets because they have settled their differences so easily," one oil trader in Singapore said.
"Oil prices will rise for a while but then stop and wait to see how the winter is and if there is excess non-OPEC and OPEC production."
Several OPEC members said they were also still concerned that some OPEC members were cheating on their assigned output quotas. Nigeria, Venezuela and tiny Gabon are all believed by outside sources to be exceeding their limits.
Most OPEC members are now pumping full out, with the exception of Saudi Arabia, but oil traders will be watching in coming weeks to see if higher oil prices prompt some to milk their wells a little bit more.
"There are a great many members, including Saudi Arabia, who are very much keen on abiding by the quota," Saudi's Nazer said. Libya's oil minister later added OPEC has some proposals to deal with overproduction but he would not specify them.
OPEC members did not discuss the issue of reintegrating Iraq into world oil markets when United Nations sanctions are removed, OPEC delegates said.
Iraq, once the world's sixth largest oil producer, said once the U.N. export ban is lifted it will ask OPEC for permission to pump oil at will until it reaches parity with rival Iran.
Most analysts do not expect UN sanctions on Iraq to be lifted in 1995 and possibly even 1996, but oil markets remain nervous that its return will flood world oil markets.
Just as challenging for OPEC was resolving the touchy political issue of who would be the new OPEC secretary-general. Iran, Nigeria and Venezuela put forward candidates and no one wanted to budge.
Iran and Venezuela blocked each other at the last OPEC meeting, but both made unusual concessions here, paving the way for Nigeria's Rilwanu Lukman, past oil minister and OPEC president, to take up the post.
A Message from The Moscow Times:
Dear readers,
We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."
These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.
We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.
Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.
By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.
Not ready to support today?
Remind me later.
Remind me later.
×
Remind me next month
Thank you! Your reminder is set.
We will send you one reminder email a month from now. For details on the personal data we collect and how it is used, please see our Privacy Policy.