VIENNA, 1 April 2004 — OPEC will cut its production target by 4 percent as scheduled, the president of the group said yesterday — a move that analysts say could drive crude oil prices higher even as customers are already facing high gasoline prices.
The Organization of Petroleum Exporting Countries, which pumps about a third of the world’s oil, will reduce its output ceiling by 1 million barrels per day effective today.
Analysts said the decision could boost oil prices to the psychologically important threshold of $40 per barrel. But prices fell in the wake of the widely anticipated announcement.
The big question now is how serious OPEC members will be in complying with its new, lower target of 23.5 million barrels per day. An expected drop in seasonal demand during the April-June quarter and quota-busting by individual members of the group could eventually dampen the effects of the cut, analysts said.
“Notwithstanding the prevailing high prices, crude markets remain more than well supplied,” OPEC President Purnomo Yusgiantoro said. “The conference reconfirmed the new production ceiling effective April 1.”
OPEC had agreed last month in Algiers, Algeria, to make the cut on April 1, but recent discomfort with rising prices in the United States and other importing countries had led some OPEC members to reconsider.
Kuwaiti Oil Minister Ahmad Fahad Al-Ahmad Al-Sabah had earlier suggested delaying the cut, but ended up supporting the decision to trim its target starting today. “We made the decision to apply the Algiers decision. We’re going to meet again in June ... and at that time we’re going to review the market,” Algerian Oil Minister Chakib Khelil told reporters.
OPEC was forced to balance consumers’ desire for lower oil prices with its own fears that swelling inventories and a seasonal lull in springtime demand could cause prices to plunge.
Most OPEC members are taking advantage of the current high prices of oil by pumping as much oil as they possibly can.
