Oil price fears
June 8, 2011
Members of The Organization of Petroleum Exporting Countries (OPEC) failed to reach an agreement over whether to increase oil production on Wednesday during their 159th meeting in Vienna.
Saudi Arabia, which is OPEC's and the world's biggest oil producer and ususally gets its way at these meetings, was unable to convince the 12-member oil cartel to boost production.
"We were unable to reach an agreement -- this is one of the worst meetings we have ever had," said Ali al-Naimi, oil minister for Saudi Arabia.
OPEC's four Gulf Arab countries suggested to raise output by 1.5 million barrels a day to 30.3 million barrels a day. But Iran, Libya, Algeria, Angola, Ecuador, Venezuela and Iraq opted to keep production unchanged. Nigeria's position was not known.
Consumer countries who had hoped OPEC would take action to control high oil prices were left concerned by the developments. The International Energy Agency, which represents many Western industrial countries, argued OPEC should have raised output to meet seasonal demand.
Western concerns
"We have noted with disappointment that OPEC members today were unable to agree on the need to make more oil available to the market," the agency said.
"Otherwise, a further tightening in the market and potential increases in prices risk undermining economic recovery, which is in the interests neither of producers nor consumers," the body added.
The meeting was followed by a shaky day on the oil markets, with Brent crude rising by $1.42 to $118 a barrel and US light crude up $1.65 at $100.74 a barrel.
Output sufficient
But OPEC Secretary General Abdalla El-Badri said markets are well-supplied. "As of today, we are not in crisis," he said.
Iran also suggested that output was sufficient, adding that postponing a decision for two or three months was appropriate.
"Iran believes there is no shortage of supply," Oil Minister Mohammad Aliabadi told Reuters.
"There is no request that we cannot meet, therefore there was no need to raise output and that was the opinion of many other OPEC members," he added.
Saudi Arabia has faced pressure from the United States to deliver a credible deal to cap crude prices and underpin economic growth.
Analysts suggest that Saudi Arabia will now step in and meet growing demand from Asia. It has previously compensated for the halt in production from conflict-torn Libya, and may now raise its output even more.
"For the markets, it means that Saudi Arabia will have to raise supply," said Jason Schenker, president at Prestige Economics from Austin, Texas.
The Financial Times reported on Tuesday that the country plans to raise its output by another 200,000 to 300,000 barrels per day.
Author: Charlotte Chelsom-Pill (Reuters, dpa)
Editor: Nicole Goebel