OPEC Leaves Output Levels Unchanged

In just finished OPEC meeting, Jan 30.OPEC ministers decided on Sunday to leave their oil production unchanged after meeting here, as they became more convinced that current high prices are not hurting global economic growth.
The energy ministers at the Organization of the Petroleum Exporting Countries maintained the group's production at 27 million barrels a day. And its president, Sheik Ahmad Fahd al-Sabah of Kuwait, said the producers would reduce their output before the group's next meeting in a month and a half if prices tumbled as a result of a seasonally weaker second quarter.
OPEC, which accounts for one-third of the world's oil production, formally abandoned a pledge to keep its benchmark price at $22 to $28 a barrel, saying that the price band had become "unrealistic."
But it did not say what new level it would seek.
"We have to find an acceptable figure to defend," Sheik Sabah said. "As Kuwait's representative, I think $32 to $35 a barrel would be a good number, but all my colleagues have a different number in mind."
OPEC's adopted its price-band mechanism in March 2000 to help it determine when to reduce production to prevent the benchmark price of crude oil from falling below $22 a barrel or, alternatively, to increase production if the benchmark rose above $28 a barrel.
But the target has become irrelevant. OPEC's benchmark price, which is based on a basket of crude oil grades that typically sell at a discount to oil futures traded in New York, has been above $28 a barrel since December 2003.
On Friday, that basket price was at $41.88 a barrel, and the commonly quoted futures price on the New York Mercantile Exchange settled at $47.18 a barrel as traders expected little change in production from the OPEC meeting.
Some oil producers had expressed concern that rising prices last year would stem the demand for oil and slow world economic growth, though the group took no action to increase supplies.
Economists differ on how the United States and China, the two largest markets for oil, have been affected. That has led to renewed confidence in OPEC that the world can live with higher prices.
The Saudi oil minister, Ali al-Naimi, told reporters over the weekend, "The world economy has grown so big that little fluctuations here and there with oil are not doing so much." He made similar comments while attending the World Economic Forum in Davos, Switzerland, last week.
Roger Diwan, a managing director of the consulting firm PFC Energy, said: "They are testing the market. OPEC seems to be saying, 'Tell us how much you are willing to pay and we will tell you what our price is.' "
Most ministers at the meeting seemed to have an idea about new price targets. Iran's oil minister, Bijan Zanganeh, suggested a range of $30 to $40 a barrel. Nigeria's representative, Edmund Daukoru, said he would be "comfortable" with $45 to $55 a barrel; and Libya's oil minister, Fathi bin Shatwan, suggested that prices as high as $60 a barrel in New York would not harm the world economy.
A new price target may be announced when OPEC meets on March 16 in Isfahan, Iran.
Analysts said that while crude oil prices might be high, relatively few consumers had seen rises in their energy bills as great as the oil prices suggested. In Europe and Japan, people have been shielded by the strength of their currencies and the decline of the dollar, the currency in which oil is sold.
"The dollar's weakness is allowing economies to grow despite the high oil prices," said Yasser Elguindi, a senior managing director at Medley Global Advisors. "As long as the Bush administration is happy with a weak dollar, OPEC will be happy with high oil prices."

OPEC expect their decission will not block the global economic growth, but it really does.In New York, one barrel of oil is up to $41 and it has trend to rise. We should consider about whether their decission is a real unhurt decission for our economic growth.