Leaders plan to slow down surging oil prices

Posted: Thursday, March 02, 2000

LONDON - Oil ministers from Saudi Arabia, Venezuela and Mexico agreed today that oil exporting countries should boost production to ease global oil prices from their highest levels in nine years.

Despite the announcement, oil prices rose modestly today in London and New York.

``Uppermost in our minds is to maintain stability in the markets,'' said Saudi Oil Minister Ali Naimi. ``We recognize that there is a need for additional production. The issue is when and how much.''

Oil exporters have come under intense pressure in recent weeks from the United States and other major oil-importing nations to pump more crude and bring prices down.

Oil prices have soared from $10.72

a barrel on Dec. 10, 1998, to a nineyear high of $31.77 in trading Wednesday on the New York Mercantile Exchange, largely because of a shortage of supply and burgeoning demand. Prices were up another 23 cents to $32 in trading today.

The announcement by three of the world's biggest suppliers of oil provided the clearest indication so far that consumers might see a decline in prices for gasoline and heating oil. Gasoline prices now average nearly $1.50 a gallon in the United States.

``In order to maintain the balance between demand and production, we are convinced that we have to increase production this year,'' Venezuelan Oil Minister Ali Rodriguez told a news conference.

The ministers refused to give further details on the timing of the expected increase, and they gave no hint of how large it might be.

``I think the number will be put forward when we finish our consultation with all other members,'' Naimi said.

The Saudi minister also refused to say what price he hoped to see for crude oil. ``We will leave that up to the market, for now,'' he said.

The decision reached by the three ministers is important. After the same three countries agreed last February on the need to cut production, other OPEC members and key non-OPEC producers joined them in March to make decisive cuts that sent prices surging.

Oil ministers from all OPEC member countries will decide whether or not to boost output when they meet at the end of the month in Vienna, Austria.

Mexico, a major oil producer, is not a member of the Organization of Petroleum Exporting Countries but agreed last March to cooperate with the group in curtailing output.

However, Mexican Oil Minister Luis Tellez told reporters that his country's pledge to cut production is due to expire later this month, and he did not rule out that Mexico might increase output on its own if OPEC decides not to do so.

``An increase in production is warranted and needed during the year,'' Tellez said.

The world consumes about 77 million barrels of oil a day, but production has fallen to 75 million barrels. The tight supply has forced oil companies to draw on inventories that have fallen to dangerously low levels, leading to a sharp spike in prices of heating oil, diesel fuel and, more recently, gasoline.

Crude prices are currently at their highest since the outbreak of the Persian Gulf War in January 1991.

OPEC has slashed output by 4.3 million barrels per day since it began cutting production in 1998. OPEC produces about 30 percent of total worldwide oil output.

U.S. Energy Secretary Bill Richardson said Wednesday that ``the odds are good'' for increased production, but he could not predict the size or timing of an increase.

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