Scrambling to control high oil prices, the Organization of the Petroleum Exporting Countries will meet Thursday, June 3, and may pursue a plan to raise quotas sharply or do away with them entirely, an OPEC spokesman said yesterday.
Lifting quotas entirely “could be one of the options” that OPEC considers this weekend, Dr. Abdulrahman al-Kheraigi, an OPEC spokesman, said in a telephone interview. “That option might be seriously considered,” he said, “but I haven’t heard anything official. I’m not ruling out anything, for now, though. Everything will be on the table.”
He added, however, that raising quotas by 2.5 million barrels a day would be the most realistic option. “Suspending the quota ceiling is highly unlikely,” he said, “there has to be a ceiling.”
Signs that OPEC may be nearing a decision to add more oil to a tight global market have helped push oil prices below $40 a barrel for the first time in weeks. After a sharp slide this week, crude oil prices edged up yesterday. In New York trading, the July contract settled at $39.88 a barrel, up 44 cents, or 1.1 percent.
The Wall Street Journal reported yesterday that a suspension of production quotas was among the options that would be considered by OPEC. Still, few industry analysts expect the OPEC meeting to touch off a steep fall in prices.
The coming OPEC meeting is more of a political than technical issue for the oil markets, said Frédéric Lasserre, head of commodity research at Société Générale in Paris, in a telephone interview yesterday. Any increase in quotas, he said, would not bring fresh barrels to the market. A quota that is greater by 2.5 million barrels a day would simply cover the existing overproduction by OPEC members.
Looking toward next week, Mr. Lasserre said, “The market seems to think we have seen the highs now, but that doesn’t mean we are going to enter into a huge downward trend.” Still, he added, “We’d have to have some fresh news to justify prices going higher.”
In Moscow, the United States energy secretary, Spencer Abraham, praised Russia’s plans to increase oil exports to America. The Bush administration has turned to Russia in the past from time to time, when oil prices have been high, and promoted it as an alternative to OPEC.
“Russian President Vladimir Putin’s address on Wednesday, in which he called for an increase in Russia’s oil export capacity and approval of new routes, I believe, is very positive news for energy markets,” Mr. Abraham said.
Russia, the world’s second-largest oil exporter after Saudi Arabia, produced 9.01 million barrels of oil a day in April, a post-Soviet record. But the country’s pipeline export capacity recently hit a ceiling of four million barrels a day. Mr. Abraham said that record oil prices were being eased by promises for greater supplies from Saudi Arabia, Kuwait, the United Arab Emirates and Nigeria.
But the United States wants Russian oil to reach the market quickly – possibly via a pipeline that could be built in the northern part of Russia for shipment across the Atlantic. “We want to see Russian oil and gas more available to the U.S. market,” Mr. Abraham said, adding that this could be done “via a northern Russian port,” which would move oil via the Baltic Pipeline System. “I’m meeting with Transneft, Gazprom and Lukoil to continue important discussions along these lines.”
Still, any new pipelines in Russia are years away. Despite Mr. Putin’s talk to the contrary, the Russian state has so far kept a tight grip on the pipeline network. The fear is that once private oil companies start building their own export routes for oil, the state will have lost all leverage over them. Moscow, so far, determines the schedules and fees for companies that want to ship oil out of Russia, where prices are still subsidized by the state.
Moreover, most of the world’s oil, or about two-thirds, is under the nations of the Persian Gulf.
Société Générale noted in a recent report that whatever happens in Russia or other non-OPEC states, the power of the 11-member cartel over global markets will continue to grow. Using forecasts from a variety of state agencies, Société Générale noted that a consensus emerged showing that the growth in non-OPEC supply would slow considerably, starting in 2015.
“OPEC will thus enjoy more market power than it has ever had,” the report said. “While it will supply less than 5 percent of demand growth between 2000 and 2005, its average share will rise steadily to reach nearly 90 percent for the period 2015-20. OPEC should use this market power to maintain prices at the upper limit acceptable to consuming countries.”