OPEC mulls to hike in production ceiling

Associated Press

Vienna, June 13:

Like a driver reflected in the puddle of oil on his driveway, crude prices can mirror the global economy and analysts aren’t pleased with what they’re seeing. As the Organisation of Petroleum Exporting Countries (OPEC) prepares to meet in Vienna on Wednesday, experts predict that prices will remain high for the rest of the year and well into 2006, even if the cartel decides to raise its production ceiling. OPEC, which churns out 40 per cent of the world’s daily production, is expected to approve a 500,000 barrels-a-day increase to make its official quota 28 million barrels a day. But it’s already pumping rou-ghly 30 million barrels, meaning the move would be largely symbolic and unlikely to bring down stubbornly high prices. Finance ministers from the Group of Eight industrialised nations, meeting in London over the weekend, called for greater investment in increased energy efficiency and alternative sources of energy.

Sustained high energy prices, they warned, “are of significant concern since they hamper global economic growth.” Prices have been hovering around $53 a barrel — well over the $50-per-barrel psychological threshold — unnerving the industry and offering no prospects for relief for consumers beset by high prices at the gas pumps. “A lower oil price is in OPEC’s interest, but the group’s power over oil prices is diminished because of the scarcity of excess capacity,” said Robert Plexman, an analyst with Canada-based CIBC World Markets Corp.

“Physical production continues to exceed demand. Thus, while ‘official’ quotas may increase, this would do no more than legitimise current production levels,” said Doug Leggate, an analyst with Smith Barney in New York. Even if OPEC raises its production ceiling, it may not make sense to add actual oil to the market, Saudi Arabian oil minister Ali Naimi said on

Saturday. Saudi Arabia is pumping 9.5 million barrels a day this month, and “that’s what is needed by customers - that’s what they are asking for. There is no shortage of supply,” he added, calling an increase in the production ceiling ‘reasonable.’