By WILLIAM J. KOLE (Business Week)
OPEC's president urged the cartel Wednesday to be vigilant with oil prices hovering above $100 per barrel, but said despite a turbulent world economy, the global market for crude was stable. "The growing sense of despondency about the future global economic outlook is generating much uncertainty in energy circles," Chakib Khelil said in an opening address to oil ministers gathered in Vienna. Khelil said, however, that crude stocks were well within their five-year average and the 13-nation group would likely leave unchanged its global output of about 32 million barrels a day. Khelil cautioned that the Organization of Petroleum Exporting Countries would have to maintain "constant vigilance" as the weak dollar, the U.S. subprime mortgage crisis and political tensions in the Middle East rattle markets worldwide. While it is common for OPEC to say it must remain vigilant, oil ministers suggested this week that the cartel would keep even closer tabs on prices and supply, and might authorize Khelil to take quick action in the next six weeks or so if he deems it necessary. "There have been signs that the oil market is moving into a new phase," Khelil said, adding: "It should be characterized by stability and not volatility."
Saudi Arabia, OPEC's top producer and by far its most influential member, also said it saw no reason to change output targets -- despite record high prices and a rebuke Tuesday from President Bush. "Understand the consequences of high energy prices," Bush said after meeting with King Abdullah II of Jordan in the Oval Office. "I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices," he added. Japan, the U.S. and other major industrialized nations have urged OPEC -- which supplies about 40 percent of world demand for crude -- to bring more oil on the market and pull down prices, which reached an inflation-adjusted record of nearly $104 a barrel this week. OPEC is resisting, pointing to slackening demand in the second quarter and suggesting it would hold off to see what happens with supply and prices this spring. "Why do we need to take any new measure if the health of the market that we follow for our policies is sound?" the pan-Arab newspaper Al Hayat quoted Saudi Oil Minister Ali Naimi as saying. Naimi told reporters in Vienna that his country is pumping roughly 300,000 barrels a day over its quota and is selling every drop "day in, day out" -- an upbeat assessment. Analysts said they didn't expect any significant action Wednesday.
"In truth, OPEC's decision not to pump more oil is a reflection that supply is relatively good," said Anthony Sabino, a professor of business at St. John's University in New York. "What is driving oil prices up to the stratospheric level of over $100 per barrel is the U.S. economy, now undeniably in recession," he said. "It's not so much the price of oil is going up -- it's that the value of the U.S. dollar, sad to say, is slumping." 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. Khelil said Wednesday that OPEC was not happy at the speculation rocking an already jittery market, saying the influence has "not been welcomed by this organization." Key cartel members said this week that prices in the $85 to $90 per barrel range would be optimal. 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.