Opec Bows To Saudi Wish Cartel Expected To Raise Oil Production Ceiling

Saudi Arabia has convinced most OPEC ministers it’s time to pump more oil, but still undecided is who will get to produce how much extra crude, delegates say.

Libya remains a holdout, fearing an increase in the production ceiling would bring lower crude prices - a good deal for consumers but bad news for oil producers.

Most ministers of the Organization of Petroleum Exporting Countries agree the official production ceiling should be raised, Indonesia’s Ida Bagus Sudjana said after the winter conference opened Wednesday.

But the ministers are sharply divided over the size of any output increase, and one delegate suggested Libya might not be the only holdout against the idea.

With the talk of extra pumping, oil prices tumbled on world markets. Light sweet crude oil for January delivery fell 58 cents to $19.15 per barrel on the New York Mercantile Exchange. Home heating oil and gasoline prices also were down.

The ministers met for 90 minutes and then recessed for two days of informal talks.

They were unable to have a serious discussion of the contentious production issue because Venezuela’s Erwin Arrieta has not yet arrived. It was unclear when he would show up.

Venezuela is responsible for the biggest chunk of overproduction - a massive 900,000 barrels a day more than its agreed quota - by the 11-nation OPEC. And the group’s efforts to grab a bigger share of the growing global market for oil will be stalled without Arrieta.

All the ministers acknowledge OPEC is exceeding its current supply ceiling of 25.033 million barrels a day by more than 2 million barrels, and they feel the market is able to absorb that much additional oil without too much damage to the price, another OPEC delegate said.

But ministers disagree over how much more oil the producers might be able to sell next year without frightening traders, said the delegate, who spoke only on condition of anonymity.

Saudi Arabia has taken a bullish view, arguing that world oil demand will rise by some 2 million barrels a day next year, and OPEC should be able to supply half of that, the delegate said.

Other ministers worry that non-OPEC producers, such as Western oil companies operating in the North Sea, will take a bigger share of the market.

There are also lingering concerns about how the recent financial crisis in Asia might harm growth in demand for crude, and how much oil Iraq might sell under any new food-for-oil deal with the United Nations. Iraq has been barred from freely exporting crude since its 1990 invasion of Kuwait.