Rejecting a call by host Venezuela for a cut in oil production, the Organization of Petroleum Exporting Countries decided Thursday to maintain current production levels to prevent near-record oil prices from rising even higher.
In announcing the decision, OPEC members said in a communique that the world oil market is oversupplied and crude oil stocks are at “comfortable levels.”
But it said oil prices remain “high and volatile” because of concern about refining capacity and anxiety over whether producers can meet future oil demands.
OPEC members said they would continue monitoring crude oil prices and could reconsider production levels before the group’s next scheduled meeting in September.
“The conference decided to retain the status quo,” OPEC said. “In so doing, however, the conference reaffirmed its determination to insure that crude oil prices remain at acceptable levels.”
Speaking to reporters at the close of the one-day meeting, Edmund Daukou, OPEC’s general secretary and Nigeria’s minister of state for petroleum, refused to define what oil price level was “acceptable” to OPEC. He said only that it must be “comfortable” for consumers and oil producers.
The price of a barrel of crude oil for July delivery closed Thursday at $70.40, down 89 cents, on the New York Mercantile Exchange.
Experts say the decision to maintain current production levels stems from concern by Saudi Arabia and other OPEC heavyweights that a further price increase could send the U.S. and other economies into recession, weaken demand for oil and reduce their revenue.
Still, analysts emphasized that OPEC’s decision to maintain the current production level of about 28 million barrels a day is no guarantee that crude prices will not rise further and take gasoline prices with them.
More Top Picks Best Hiking Boots For Women
While world demand for oil remains strong and production among OPEC nations is at or near capacity, the steep price of crude oil is being largely fed by political tensions and other factors in several major oil-producing countries.
Iran is at loggerheads with the U.S. and Europe over its nuclear program. Nigeria is battling rebels in its oil-producing region. And Iraq is at war.
“OPEC is not acting as a cartel because it’s not restricting production. It’s producing all it can,” said Larry Goldstein, president of the New York-based Petroleum Industry Research Foundation.
“It’s the loss of spare production capacity that is setting the prices, and that means a high price environment for some time to come,” Goldstein said.
Goldstein said the political unrest in Nigeria, for example, is causing the West African nation to produce about 500,000 barrels of oil a day below its capacity. And the war in Iraq has constricted that country’s ability to ramp up oil production as fast as expected.
Even oil production in the U.S., a non-OPEC country, has fallen by more than 250,000 barrels a day because of damage caused to off-shore rigs and other equipment by Hurricanes Katrina and Rita, Goldstein said.
Nationalist policies in several oil-producing countries also are rattling markets and putting upward pressure on oil and gasoline prices, experts say.
Russia is centralizing its hydrocarbon and mineral industries, and Bolivia recently nationalized its oil and gas industry. Venezuela, a major oil exporter to the U.S., has sharply increased taxes on multinational oil companies operating here.
Venezuelan President Hugo Chavez, a fierce critic of President Bush, also is demanding that Petroleos de Venezuela, the state-owned oil company, take a larger equity stake in petroleum operations in this country, something experts say could dampen foreign investment.
“The oil companies will probably stay in Venezuela, but I’m not sure they will invest,” said Jose Toro Hardy, a Chavez critic and former member of the state-owned oil company’s board. “And what we need is investment to increase production.”
In a speech opening the OPEC meeting Chavez said OPEC was not responsible for high crude oil prices and, instead, blamed market jitters on the U.S. invasion of Iraq and its threats against Iran and Venezuela.
He also attacked the economic model promoted by Washington, which he said fuels an insatiable appetite for oil and other non-renewable resources. Chavez described capitalism as “unsustainable.”
“I’m sure the grave of the imperial United States is dug,” he said. “The day will arrive when it is buried.”
Chavez’s anti-American remarks appeared to upset representatives from Saudi Arabia and other OPEC members who are close allies of the U.S.
The Venezuelan president’s failure to push through a production cut or a $50-a-barrel floor on the price of oil also illustrates his isolation in the 11-member group, experts say.
“Chavez knew going in that his political agenda would be unpopular with OPEC,” said Goldstein. “He really doesn’t care what other members of the organization think because his comments were focused to his audience in the region.”
Asked about Chavez’s speech, Shokri Ghanem, Chairman of Libya’s National Oil Corp. and head of he nation’s OPEC delegation, said only that “the president can say whatever he feels. Freedom of speech is always guaranteed to everyone.”
Goldstein and other experts said it was easy for Chavez to push an oil production cut because Venezuela is one of the few OPEC members that is producing far below its quota.
———-