World

Sitting Pretty

By CBSNews.com staff CBSNews.com staff

November 12, 2000 / 12:51 PM EST / CBS

OPEC's not in the mood to give oil prices any more help in their expected trip downward.

At least not yet.

Oil ministers Monday decided against increasing oil production and ratified a weekend agreement not to adjust crude production quotas that have already been raised four times this year.

The oil cartel has reached the end of a cycle that reinstates most of the supply curbs it put in place when oil prices crashed below $10 a barrel in 1998.

OPEC ministers are predicting that crude oil, still well above $30, will soon fall into their target range of $22 to $28 as the full impact of this year's 3.7 million barrels daily of supply increases is felt.

"We can only conclude that OPEC has more than fufilled its role as a reliable oil supplier and that the true reasons for currently high prices lie behind a series of other factors," said OPEC President Ali Rodriguez of Venezuela.

Rodriguez took aim in particular at shrinking refining capacity in the United States, the world's biggest importer.

"The feeling we have now is that the market is getting perhaps a little saturated and as stocks build up, it is likely to hit us in the face later in the New Year if we don't watch it," said cartel secretary-general Rilwanu Lukman. "We do not want to overdo it and put the market in a state of jeopardy."

OPEC's decision comes on the heels of recent U.S. oil industry and government reports showing heating oil supplies which are well below normal levels and a decline in gasoline inventories.

Oil dealers reacted cautiously to the OPEC decision. London Brent futures rose 11 cents to $32.13 a barrel with U.S. light crude unchanged at $34.02.

The group meets again on January 17 by which time oil market analysts expect a year-on-year deficit in inventories to have turned into a surplus.

"At current production levels they are already oversupplying the market for 2001 requirements," said Gary Ross of U.S. consultancy Petroleum Industry Research Associates."

"If they want to sustain oil prices they may have to take action on cutting supply in the first quarter."

Saudi Oil Minister Ali al-Naimi left the door ajar for the slim possibility of extra deliveries should prices go into orbit. He said Riyadh, in control of most of OPEC's spare capacity, could act alone on supply if necessary but more time is needed to assess the impact of earlier increases.

Many OPEC states remain more worried about a post-winter price slide than the impact of high energy costs on inflation.

"OPEC wants to avoid an uncontrollable collapse in prices and that's why it will continue to micro-manage the market by meeting again in January," said Raad Alkadiri of Washington consultancy Petroleum Finance Corp.

Venezuela's Rodriguez emerged as a last-minute compromise to replace Rilwanu Lukman as cartel secretary-general after the failure to select from candidates put forward by Iraq, Iran, Saudi and Libya.

Vnezuelan President Hugo Chavez will name a new Venezuelan oil minister in due course. Algeria's Khelil takes over as OPEC president in January.