VIENNA, Austria - The current high price of oil should not prevent OPEC from cutting its output target by 4 percent as planned, oil ministers said Tuesday.
Those arguing for pressing forward with the cut claim the world market is awash with crude - something that might surprise U.S. motorists who are paying record prices for gasoline.
Saudi Arabian oil minister Ali Naimi said the 11-member Organization of Petroleum Exporting Countries should stick with its earlier decision to trim its output target by 1 million barrels per day starting Thursday. Oil ministers from Venezuela, Libya, Algeria and Iran similar arguments.
OPEC representatives were gathering in Vienna for informal talks on output policy before meeting formally today. OPEC supplies about a third of the world's oil. Its current output target is 24.5 million barrels per day.
If OPEC follows through on its Feb. 10 agreement to cut its production target to 23.5 million barrels, it risks driving up crude prices toward the psychologically important threshold of $40 per barrel. That could damage the global economy and the long-term demand for oil, said John Waterlow, an analyst at Wood Mackenzie Consultants in Edinburgh, Scotland.
However, if the group postpones its promised cut, it may hurt its credibility and oversupply the market just as demand starts to slow in the second quarter. The result could be "a precipitous fall" in prices that everyone in OPEC wants to avoid, Mr. Waterlow said.
Prices are already uncomfortably high for importers and consumers. U.S. light, sweet crude reached a 13-year peak of $38.35 per barrel March 17. U.S. crude futures for May delivery were trading Tuesday at $36.30 per barrel, up 85 cents, in New York. In London, May contracts of North Sea Brent gained 71 cents to settle at $32.45 per barrel.
U.S. Sen. Charles Schumer, D-N.Y., urged President Bush to pressure OPEC to boost production in an effort to increase oil supplies and help U.S. motorists.
But no matter what OPEC does today, it probably won't provide any immediate relief at the pump.
"It's unlikely that (U.S. gas prices) will be going down for a while," Mr. Waterlow said.
Although demand for oil in Asia and the United States has been unexpectedly strong, Mr. Naimi, of Saudi Arabia, blamed investors and speculators for pushing crude prices up to their highest levels since the 1991 Persian Gulf War.
Current prices "have absolutely nothing to do with supply and demand" for crude, he said.