Caracas, Venezuela – Major oil-producing countries are set to keep crude output unchanged at an OPEC meeting today despite Venezuela’s calls for cutting production, while some cartel members hinted at the possibility of trimming supplies down the road.
Venezuelan Oil Minister Rafael Ramirez said reducing output now is justified because global markets are well supplied, adding that uncertainty over U.S. actions against Iran and the war in Iraq were prime causes of today’s high oil prices.
Ramirez said OPEC should consider a cut but that “we don’t want to introduce elements that are going to be contributing to instability.”
While many members of the Organization of the Petroleum Exporting Countries would agree that geopolitical instability – as well as refinery bottlenecks and investor speculation – plays a major role in pushing energy costs higher, they nevertheless do not want to risk exacerbating the situation by cutting output.
The political backlash would likely be considerable, and, economically speaking, the move could backfire against OPEC if higher prices led to reduced demand, analysts said.
“There has been talk of a cut for months now, which typically tends to be pushed back to the next meeting, over and over again,” said Antoine Halff, director of global energy at Fimat USA in New York.
“This meeting is more about Venezuelan politics than it is about OPEC policy,” said Halff, citing comments made Wednesday by Ecuador – one day after Venezuelan President Hugo Chavez paid a visit – that it is considering rejoining OPEC.
While this would not significantly shift OPEC’s center of gravity away from the Middle East, it might still be seen as a victory for Chavez as an international statesman.
Ramirez said he would welcome Ecuador – and Sudan – into the group.
