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November 13, 2000 

VIENNA, Austria (AP) — OPEC snubbed consumers Sunday by rejecting a price-easing increase in oil production and raising the specter of slashing output early next year to keep prices from falling too fast.

``These guys want to make sure prices don't collapse, and making the market aware they are willing to cut production is one way to protect those prices,'' said Raad Alkadiri, an oil analyst with the Petroleum Finance Company.

The 11 nation oil-producing cartel, which produces 40 percent of the world's crude, argues it's just a matter of time before prices tail off and that it could be battling a market awash in oil that fewer people want to buy.

Until then, consumers are left with some of the highest oil prices in ten years.

Winter demand for heating oil is expected to evaporate with warm spring weather and the Organization of Petroleum Exporting Countries remembers getting burned by a dramatic plunge in demand after boosting output in December 1997. One year later, prices dropped to about $10 a barrel, battering oil-dependent OPEC members.

Speaking after an informal OPEC meeting Sunday, Kuwait Oil Minister Sheik Saud Nasser al-Sabah said the cartel would not increase output before Jan. 17, when delegates agreed to meet again and reassess prices and production quotas.

But when it does decide to modify its output, OPEC is more likely to cut crude production than to raise it.

OPEC is nearly pumping as much as it can right now, and al-Sabah said it is likely the members will reach a consensus about cutting back at their next meeting.

``I think that will be decided in January,'' al-Sabah said.

Refusing to budge on production is a marked departure for OPEC, which has already boosted output four times this year, by a total of 3.7 million barrels a day, in an attempt to cap surging prices.

Sunday's decisions still need to be approved at an official meeting Monday morning, but analysts were already giving them mixed reviews.

``It may be concerning to markets,'' said Jareer Elass, an analyst with Oil Navigator. ``Number one, because another increase is unlikely to kick in, and the other worrying factor is the talk about cutting output.''

While Elass predicted that news will help keep crude prices high, other analysts say prices are still on track to decline gradually through the winter.

On Friday, December crude futures were up 10 cents to $34.02 a barrel on the New York Mercantile Exchange. North Sea Brent crude stood at $32.02 a barrel on the International Petroleum Exchange in London.

Saudi Oil Minister Ali Naimi tried to ease market concerns Sunday by saying OPEC still seeks to keep crude prices between $28 and $22 a barrel. But he also added that any production increases would be decided by ministers, not necessarily by a formula they have used in the past.

Under that formula, known as the price-band mechanism, OPEC adds 500,000 barrels to its daily production if the average price for OPEC crude exceeds $28 for 20 consecutive trading days.

``The price band mechanism is still in place but it doesn't replace good judgment,'' Naimi said.

Most recently, high prices triggered an automatic increase on Nov. 1 of half a million barrels a day in OPEC output.

And because prices are all but certain to remain above $28 for another 20 day stretch — prices for the basket of seven crudes OPEC considers have been hovering around $30 for the past eight days — OPEC should, in theory, decide to hike production once again in the near future.

OPEC members produced about 29.5 million barrels a day in October, according to the Paris-based International Energy Agency. That's substantially higher than the group's official target output of 26.7 million barrels a day.

Among other issues hammered out Sunday, ministers said they would name OPEC President and Venezuelan Oil Minister Ali Rodriguez the cartel's next secretary-general. Rodriguez will replace Nigerian Rilwanu Lukman starting Jan. 1.