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Saudi Says OPEC Will Hold to Cuts

March 30, 2004|From Bloomberg News

OPEC members will proceed with a plan to cut crude-oil production quotas by 1 million barrels a day, Saudi Arabia's oil minister said Monday.

Ali Ibrahim Naimi's comments came as he arrived in Vienna for Wednesday's meeting of the Organization of the Petroleum Exporting Countries. OPEC will not reverse its Feb. 10 decision to cut output, as some industry experts have speculated, he said.

Saudi Arabia's share of the April production cut has "already been implemented," Naimi told reporters. The cuts were made this month through supply contracts the Saudis have with oil buyers, he said.

OPEC ministers are gathering in Vienna to decide whether to implement the quota cut, equal to about 4% of the producer group's output.

The United Arab Emirates and Qatar have in the last 10 days said OPEC may delay the April cuts. Venezuela and Algeria have said the decision should stand.

Oil prices in the U.S. have risen 8% since the February meeting. Purnomo Yusgiantoro, OPEC's president, said Monday that the producers were concerned about high oil prices. London oil prices are up 20% from a year earlier and prices in New York are up 18%.

On Monday, crude oil slid 28 cents to $35.45 a barrel on the New York Mercantile Exchange. New York oil prices are down 7.2% from a 13-year closing high of $38.18 a barrel reached on March 17.

There is "plenty" of oil in the market, Naimi said. Saudi Arabia is committed to a target price of $25 a barrel. "I have said that many, many times," he said.

Stronger than expected demand, led by China's expanding economy, has underpinned the price of crude this year. That has sent U.S. retail gasoline prices soaring and boosted earnings at oil companies such as BP and Exxon Mobil Corp., and at companies that refine oil into gasoline for the U.S. market, including ConocoPhillips and Valero Energy Corp.

Oil consumers have criticized rising prices, which lead to higher costs for businesses. Houston-based Continental Airlines Inc. last week raised fares for the second time in a month to help cover rising fuel costs, which it said would wipe out its profit this year.

U.S. Treasury Secretary John W. Snow on Thursday described the current outlook for oil prices as "regrettable." Banks, including Deutsche Bank and Credit Suisse First Boston, recently have raised their estimates for oil prices.

"What we are concerned about now is the high price," Purnomo said in an interview in Vienna. "We see it going slightly down" in the second quarter, he added.

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