No Production Boost From OPEC

VIENNA, Austria — OPEC on Wednesday accused the U.S. of economic "mismanagement" that it said is pushing oil prices to new record highs and rebuffed calls to boost output, laying the blame on the Bush administration.

Oil prices surged for the first time past $104 a barrel after the OPEC announcement and the release of a U.S. government report showing a surprise drop in crude oil stockpiles.

The 13-nation Organization of Petroleum Exporting Countries said it would maintain current production levels because crude supplies are plentiful and demand is expected to weaken in the second quarter.

OPEC President Chakib Khelil told reporters the global market is being affected by what he called "the mismanagement of the U.S. economy," and that America's problems were a key factor in the cartel's decision to hold off on any action.

"If the prices are high, definitely they are not due to a lack of crude. They are due to what's happening in the U.S.," Khelil said. "There is sufficient supply. There's plenty of oil there."

Khelil's comments came one day after U.S. President George W. Bush lashed out at the organization, warning Tuesday: "I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices."

White House spokesman Dana Perino said Wednesday that Bush was "disappointed" OPEC didn't do more to rein in prices, which some say are pushing the U.S. economy into recession.

Analyst John Hall, of John Hall Associates in London, said OPEC probably should have added oil to the market as Bush had asked.

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"But in this time of intense geopolitical tension, it would be difficult for Saudi (Arabia) or any other producer to acquiesce simply because President Bush had asked them to," he said. "In the short term, any true respite for the consumer is still out of reach."

Although OPEC opted not to intervene, it did pledge to maintain "constant vigilance" over the market.

Khelil said he and OPEC's secretary-general were authorized to call an extraordinary meeting or hold phone consultations "at any time, depending on the pressures on the market" _ an apparent gesture to ease global economic jitters.

There had been some speculation that OPEC might actually cut production _ a move that would drive prices even higher, along with profits for cartel members _ but Khelil said a cut was not discussed at Wednesday's meeting. He said OPEC had no plans to meet again before its next scheduled conference in September.

Earlier in the week, price hawks Venezuela and Iran indicated they planned to push for less production.

Khelil said crude stocks were well within their five-year average and the 13-nation group was not inclined to either boost or reduce its current output of about 32 million barrels a day. OPEC satisfies roughly 40 percent of the world's demand for crude.

OPEC said it "highlighted the economic slowdown in the U.S., which, together with the deepening credit crisis in financial markets, is increasing the downside risks for world economic growth and consequently demand for crude oil."

"Crude oil prices are being strongly influenced by the weakness in the U.S. dollar, rising inflation and significant flow of funds into the commodities market," it said.

Oil shot up a dramatic 19 percent last month as the falling dollar prompted speculators and other investors to shift cash to crude and other commodities as a hedge. Among other reasons for the spike: tensions in the oil-rich Middle East and Turkey's incursion into northern Iraq.

Key cartel members said this week that prices in the $85 to $90 per barrel range would be optimal.

But oil's only direction Wednesday was up.

Light, sweet crude for April delivery rose $2.02 to $101.54 a barrel in electronic trading on the New York Mercantile Exchange by the afternoon in Europe _ amid growing expectations that it stood to climb even higher.

"There's an ongoing stampede to be a part of the crude oil rally," said Tim Evans, an analyst at Citigroup Inc., in New York.

Hall said OPEC was partly to blame for economic woes in the U.S. and elsewhere. "By helping the price to rise, they have fueled inflation and they're fueling recession," he said.

But Stephen Schork, editor of The Schork Report, which keeps tabs on global energy markets and trends, said the cartel may not have had much choice.

"If you're OPEC, you see ample supplies and questionable demand," he said.

Schork gave OPEC credit for not pushing through a cut in output, which "would legitimize the bullish speculation we've seen since February" and risk sending oil to $120 a barrel or higher.

Crude inventories are growing, including "a massive increase" in U.S. stocks, Schork said.

"It's certainly a comfortable supply situation," he said.

The 13 OPEC members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Iraq is the only member not subject to the cartel's output quotas.

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On the Net:

OPEC, http://www.opec.org

Comments

[zaphod21]

This is slightly OT from the Oil angle, but not sure where else to mention. I saw that M. Thomas Eisenstadt just blogged about Jordan's King Abdullah II and Asst. Sec. of State Thomas Callahan. Turns out they may have been frat buddies at Dartmouth. It might explain a few things about OPEC and Abdullah's trip to Washington: http://www.eisenstadtgroup.com/2008/03/07/animal-house-and-the-king-how-the-plagiarism-scandal-leads-to-very-strange-places/

[gcallaghan]

Hmmmm...Is OPEC revealing that the gas price hike is caused by domestic producers?

[Harrier]

It is clear our government needs to invests in new and green technologies and had been told not to by Oil executives

[Sundialsvc4]

"Exactly, President Khelil. Very well put."

First of all, it's not OPEC's problem. Oil isn't tanking; it's the American dollar. The unelected war-lords who took over the American Government built a house of cards in pursuit of ... leprechaun gold. Their ravenous greed has been repaid ten thousand times over -- with glittering, but moldy and worthless, straw. Like a tale from "1,001 Nights," nearly at its last page.

Because of this, the world community will have no choice but to recant their use of the American Dollar as the world exchange-currency for petroleum. In the future, there probably won't be a single one; nor should there ever have been one. The treaty that Henry Kissinger negotiated in the 1970's was a bad one for the world, and I doubt there's anything that Henry could do now to preserve it even if he tried.

Certainly, that treaty allowed the United States to outgrow its Pampers, which it very-promptly did. The gold standard was stopped and the printing-presses started up, to the point that in the few minutes you've spent reading my words, more than $5 million more "dollars" have been manufactured. This can't go on. You can't buy a critical product in a casino that cheats at cards.

The United States also outgrew itself in a purely military sense, building thousands of nuclear bombs with all that borrowed money and trying to exert an ersatz "Pax Americana" across the entire planet. But it was not a "Pax" of Peace; it was a "Pox" of War. Fueled, always fueled, by all that fuel money. The highly-productive industrial infrastructure that made this country legendary disappeared ... "we have servants for that."

Guess not. OPEC knows perfectly well who invaded their countries, and who is poised to invade still more. Yet, they know there is a non-military vulnerability that must now be "leveraged" hard -- both for the good(!) of the rest of the world, and yes, for the good of what's left of America.

[Sundialsvc4]

Remember... these unelected war-lords, consisting of a relatively slight majority in the Senate, in the House and in the Supreme Court and lead by one or perhaps two masterminds in the Executive Branch, have shown themselves to care not-at-all about their country. Their escape-plans have already been set, should the need arise, but their succession-plans are in place also. It does not the votes that count, but who counts the votes. (It will all be so-much the more easier if artfully-worded initiatives named "Net Neutrality" can be defeated, allowing even the free-voice that you are enjoying right now to be censored and cut off.)

You should be terrified.

You stand to lose ... everything. To a group of criminals who will simply disappear to a far-off land where you can't reach them. If you're young, you're cannon-food. Middle-aged, you're broke. Retired, and now you find that your retirement nest-egg was squandered on worthless securities so now you're selling apples too. Oh, the industrial infrastructure is still there, dormant, but it's been bought up by your nation's enemies and they're not about to let you get-up anytime soon... nor should they; it could happen again. So this country is left to starve while discussions are made concerning real-estate. Give us California, Oregon and Washington to become our new country. You'll like it here, and you have no choice.

No, I'm actually not being too cynical. Look, for instance, in your own Bible, reading it as an easily available book of history. This is not a history of nations "subdued," it is continuously a history of defeated nations that were crushed and scattered, their gold sifted and carted-off. History, throughout history, is full of such tales. Truly, the American People are playing with utter abandon and naiivete a game that is bone-wrenchingly real and deadly . . .