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Opec stalls on oil price as weaker dollar erodes profit
March 30, 2004
By Sapa-AFP
Paris - Opec's reluctance to rein in oil prices is less a sign of a change in attitude in the oil cartel than a bid to compensate for loss of revenue because of the weak dollar, analysts say.
Opec has twice shocked the market in recent months by announcing a cut in its production quota even though high oil prices did not appear to justify this.
The cartel has said one reason is that many countries are in fact enjoying low oil prices because of the weak dollar.
The market is waiting with baited breath to see if Opec will hold firm on its 1 million barrels a day production cut for April 1 when it meets in Vienna.
The cartel surprised oil markets in February by announcing in Algiers that it would cut its production quota from 24.5 million barrels per day to 23.5 million as of April.
Traders had expected it to wait until the European spring to announce any cuts as prices, which have been hovering between $33 and $37 a barrel, were still above Opec's target band of $22 to $28 a barrel and demand was still high owing to an exceptionally cold winter in the US and Europe.
But Opec members said they were reducing the production quota and that production over this quota that had been stimulated by high demand was to be eliminated by the end of March, with the excess estimated at 1.5 million barrels per day.
Oil prices have been well above the target band for months, which has irritated many clients and led some Opec members, notably Nigeria, to call for the band to be rescheduled upwards.
Opec's attitude contrasts with its stance a year ago as the US-led war on Iraq loomed. The cartel then announced it would do its utmost to avoid oil shortages and keep prices in check.
It had even appeared to bury the hatchet with the International Energy Agency (IEA), an organisation that monitors global oil supplies.
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