BEIRUT, Lebanon – OPEC ministers said yesterday that they will increase oil production, allowing members to pump at will and bypass the quota system that has governed supplies for most of the past two decades.
"Everybody should produce what they want over the next few months," Qatar’s energy minister, Abdullah bin Hamad al-Attiyah, said in an interview in Beirut, where OPEC meets tomorrow. "We do not want to see any shortage of supply at all, and we want to avoid shocks."
Saudi Arabia, the world’s biggest oil exporter, will ensure that markets have enough supply, said the kingdom’s oil minister, Ali al-Naimi. The Organization of Petroleum Exporting Countries’ president, Purnomo Yusgiantoro of Indonesia, called for efforts to cause a "significant" drop in prices.
OPEC members, who rely on oil sales for government revenue, are increasing output to capture rising prices and to prevent higher energy costs from damaging growth in energy demand. United Kingdom Chancellor of the Exchequer Gordon Brown said OPEC should pump more, after calls from officials in the United States and Canada.
Oil prices fall
Crude oil prices fell after the OPEC remarks, losing $2.37 to $39.96 a barrel on the New York Mercantile Exchange. Crude touched $42.45 a barrel Tuesday, the highest since New York futures began trading in 1983. Brent crude slid $2.22 to $36.86 a barrel in London.
The change in OPEC’s stance may take the form of an accord to boost production targets by 2.5 million barrels, to 26 million barrels a day, al-Attiyah said. The group since the early 1980s has set output quotas in a bid to regulate the market. Before then, the group, founded in 1960 in Baghdad, simply set oil prices.
Kuwait’s oil minister, Sheik Ahmad Fahd al-Ahmad al-Sabah, said the 10 OPEC nations with quotas will pump 800,000 to 1 million barrels a day more than the 25.7 million produced in May.
"We have to increase our production to stabilize the market," al-Sabah said. "The new production should bring the price down slowly over the next two weeks by $6 to $8 a barrel."
An Iranian official said his nation, the second-largest OPEC producer, was backing a boost of 2 million barrels a day unless the group agreed to raise its price target of $22 to $28 a barrel.
Violence is increasing in the Middle East, adding to concern about the security of oil supplies from the region. U.S. refining bottlenecks and anxiety about potential attacks on Middle East oil installations have inflated prices by $10 a barrel, the Qatari minister said.
Saudi Arabia has raised oil output to 9.1 million barrels a day, a Persian Gulf oil official said Tuesday. That compares with Saudi assessments of capacity of 10.5 million barrels a day. Outside estimates say the limit may be 10 million.
Ministers are scheduled to have an informal gathering today in Beirut, to deliberate policy, followed by a formal meeting.
"What we need is a volume that can have a really significant impact" on oil prices, said Purnomo.
The United Arab Emirates oil minister, Obaid bin Saif al-Nasseri, said his nation is pumping 2.45 million barrels a day, 400,000 above its OPEC quota and at the nation’s limit. As of the middle of the month, production capacity should rise to 2.5 million barrels, he said.
Ministers said yesterday that security at Middle East oil installations is increasing, seeking to allay concern among traders of threats to production. For the pre-meeting gathering in Beirut, the Lebanese army provided security, and sharpshooters were placed on buildings surrounding the ministers’ hotel.
Saudi Arabia’s al-Naimi said his nation wants to keep prices between $22 and $28 a barrel for the OPEC price benchmark. OPEC can’t always control prices, and Saudi Arabia plans to ensure demand is always met, he said. "We know the price is high, but we can assure you the kingdom and the other producing countries do not want a price that can reduce economic growth," al-Naimi said.
Saudi Arabia announced May 21 an increase in production and suggested the group’s target rise by at least 2 million barrels a day, or 8.5 percent. Purnomo and ministers from Qatar and Kuwait have said OPEC won’t formally suspend its system of oil quotas.
The Algerian minister said he supported suspending the limits to show oil traders that prices should decline.