OPEC has seemingly bowed to U.S. pressure for cheaper oil by agreeing to higher output limits, immediately agreeing to turn up the taps by 1.45 million barrels daily, or seven percent. Iran, OPEC’s second largest producer, opted out of the deal, saying it feared a price plunge and complaining about interference from Washington. The action, which has been anticipated given the strong political pressures placed on the OPEC ministers, immediately sent petroleum prices into a tailspin, with Brent futures dropping $1.26 to $24.25 per barrel.
OPEC won applause from the Clinton administration, which said there was now no need to release national emergency supplies to ease election year political pressure from consumers irate at high gasoline prices. "This decision was made in the interests of producers and consumers in a prudent way. It will have a positive impact and moderate prices," Saudi Oil Minister Ali al-Naimi said.
President Bill Clinton said: "These increases will help sustain worldwide economic growth and provide greater balance between oil supply and demand."
Naimi said OPEC was aiming to keep the price of benchmark North Sea Brent in the range $20-$25 a barrel compared to a recent nine-year high
Despite Iran’s complaints, it will nevertheless raise production at the allocation in any case from April 1. That will add another 265,000 barrels daily.
"We will not lose market share," Iran's OPEC governor Hossein Kazempour Ardebili was quoted as saying. "We will certainly do the increase that would have been allocated (and) we will consider our position on increasing beyond that."
Non-OPEC Mexico and Norway, having cooperated with OPEC in cutting exports when prices crashed, are shortly expected to announce their own supply increases. Ross of PIRA said net new OPEC oil could be expected to rise by about a million barrels a day. That is not as much as OPEC is offering on paper because of recent leakage over official quotas.
U.S. Energy Secretary Bill Richardson said Washington had withdrawn its threat to release crude from the national strategic petroleum reserve. He predicted a 28 cent fall in U.S. wholesale gasoline prices by December.