| sammyg2 |
09-11-2008 12:01 PM |
Hmmm, did some more checking.
here is the NYTimes article that first blog referes to. seems to me like it paints a less sensationalistic picture. Could it be that the blogger exaggerated an embelished a little? hard to say , too early.
Quote:
Saudis Vow to Ignore OPEC Decision to Cut Production
By JAD MOUAWAD
Published: September 10, 2008
VIENNA — Hours after suffering a rare setback in a negotiating session at OPEC’s headquarters, Saudi Arabian officials assured world markets on Wednesday that they would ignore the wishes of other cartel members and continue to pump plenty of oil.
The late-night bargaining session ended early Wednesday morning with a surprise declaration that OPEC would cut production to shore up sagging prices. Saudi negotiators publicly endorsed that position, but then spent much of Wednesday privately spreading the word that they did not feel bound by it.
The back-and-forth illustrated new pressures and power politics at play in the group that controls 40 percent of the world’s oil production. The meeting could be a harbinger of things to come for the Organization of the Petroleum Exporting Countries as the cartel faces its most difficult challenge in years: how to respond to falling oil prices in a weakening global economic climate.
The confusion surrounding this week’s meeting slowed the decline in prices as oil markets struggled to understand the cartel’s byzantine politics. Oil closed Wednesday at $102.58 a barrel in New York trading, a decline of 68 cents.
After a 30 percent drop in prices since July, and with oil seemingly headed below the psychological milestone of $100 a barrel, OPEC producers are getting anxious. The cartel’s president, Chakib Khelil, said the group was particularly concerned that slowing demand for oil was creating a glut in the market that might provoke a collapse in prices.
Still, going into the meeting, Saudi Arabia was expected to prevail in its stated goal of keeping enough oil on the market to drive prices below $100 a barrel. The Saudi view is that lowering prices moderately now will shore up the world economy and prevent a recession that would cause oil prices to collapse. The Saudi oil minister, Ali al-Naimi, described the markets as being “well balanced” when he arrived in Vienna.
But after a six-hour private meeting, OPEC ministers decided to pare their production by complying strictly with targets that had been set up last year but were largely ignored. According to Mr. Khelil, who is also Algeria’s oil minister, OPEC’s actual production would have to be lowered by about 500,000 barrels a day within the next 40 days.
“We are oversupplying the market, and we are cutting that oversupply,” said Abdalla Salem el-Badri, the group’s secretary general. “We don’t want to see these prices decline dramatically.”
It remained unclear Wednesday exactly how the Saudis lost the argument behind closed doors. And despite the OPEC communiqué, it is far from clear that OPEC members will actually reduce their output. After a short night, Saudi officials were quick to reassure markets.
“Saudi Arabia will meet the market’s demand,” a senior OPEC delegate said. “We will see what the market requires and we will not leave a customer without oil. The policy has not changed.”
The Saudi message is to wait and see where demand is headed before eventually paring supplies. The Saudis made their strategy clear Wednesday in informal talks and briefings with some oil industry analysts and reporters, but as is their custom, they would not speak for attribution because they did not want to appear to undermine a collective OPEC decision.
In June, King Abdullah pledged that his country would pump at full tilt to bring prices down. In August, the kingdom increased its production to 9.7 million barrels a day, the highest in three decades. Saudi Arabia is now producing around 9.5 million barrels a day, 600,000 barrels a day more than its quota.
“This seems to set Saudi Arabia up as the unilateral decision-maker on output for the fall,” said Greg Priddy, an energy analyst at Eurasia Group, in a research note. “Clearly, other OPEC members are not going to trim their own production without Saudi Arabia returning to its quota. Saudi Arabia also seems to be eager to avoid headlines about it cutting production in advance of the U.S. elections.”
Adding to the confusion, OPEC said that two new members, Angola and Ecuador, were given new production quotas while Indonesia, a member since 1962 that has become a net importer of oil in recent years, was suspending its membership in the organization by the end of the year. OPEC officials had trouble explaining precisely how much production would need to be cut. Mr. Badri also declined to provide new targets for each member state.
OPEC’s discordant message is a reflection of the competing policies at play within the group, which includes countries like Kuwait, Nigeria, and its newest and smallest member, Ecuador. Some countries are carefully managing their oil windfall, while others are spending freely with the expectation that prices will remain high.
Moderate and pro-Western states like Saudi Arabia and the United Arab Emirates are aware that high energy costs are hurting demand and might push consumers to seek alternatives to oil. These countries want to see prices fall below $100 a barrel to ease political enmity against the cartel.
Another group, composed of OPEC’s traditional price hawks, increasingly needs high prices to finance a wide range of social and military policies. Analysts say they believe that Iran and Venezuela, for example, cannot afford prices below $100 a barrel as they seek to project power in their respective regions.
As OPEC worked to push up prices from lows reached in the late 1990s, members of the cartel all shared the same interests and were willing to leave their differences aside. But now that demand is weakening and prices are falling, some analysts say they believe that tensions within the group are resurfacing. In past years, OPEC has been notoriously bad at maintaining discipline in its ranks when prices fall.
The perception that OPEC was unwilling to do its part to bring down prices brought sharp criticism Wednesday from Western officials. “We’d like to see more oil on the market, not less,” the White House press secretary, Dana M. Perino, said at a briefing.
The decision represents a rare case of the cartel going against the position of its biggest member. As he walked from his hotel to the OPEC headquarters on Tuesday evening, Mr. Naimi, the Saudi minister, seemed particularly proud of his country’s efforts to pump as much oil as needed to push down prices.
“It was hard work,” Mr. Naimi said, strolling along the city’s cobbled streets. “The market is in a very healthy position.”
Six hours later, Mr. Naimi left the meeting without a word of public comment.
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