Angry Kuwait Ignores OPEC, Sets Own Oil Output Quota
GENEVA (AP) _ Kuwait, angered by OPEC’s refusal to give it a higher pumping quota, says it will boost oil production by more than 500,000 barrels a day in the coming months.
The emirate late Thursday rejected an offer from the Organization of Petroleum Exporting Countries to increase Kuwait’s quota by 10 percent, or 160,000 barrels a day.
Kuwait’s decision to pump much more than that to recoup its Gulf War costs undermines OPEC’s plan to keep a lid on production and prices.
Other OPEC members, led by Saudi Arabia, the cartel’s biggest single oil producer, went ahead with their own agreement to maintain the current overall production ceiling of 23.6 million barrels a day from July through September.
In trying to keep production on an even keel, the nations hope to halt the slide in crude oil prices and even nudge them closer to their target of $21 a 42-gallon barrel. There were also worries that if Kuwait were given higher production levels, other OPEC partners such as Nigeria and Iran would make similar demands.
The disarray in the cartel sent crude prices falling on the New York Mercantile Exchange on Thursday. The July contract for light sweet crude fell 36 cents to $19.28 a barrel.
OPEC already is overproducing, pumping about 600,000 barrels a day above its promised supply cap. Kuwait now represents a wild card for the markets.
Kuwaiti Oil Minister Ali al-Baghli said it was with ″deepest regret″ that he turned down OPEC’s offer to raise production by 10 percent in the third quarter.
He told reporters OPEC had guaranteed last February that his country would receive a substantial increase in its production quota for the summer.
″I don’t believe any more in their promises,″ al-Baghli said.
Kuwait had proposed an increase of 400,000 barrels a day in July and August and an additional 160,000 barrels a day in September. That would bring Kuwait’s total output to 2.16 million barrels a day by the end of the quarter.
Without OPEC’s approval, Kuwait intends to increase its production sharply, perhaps even reaching 2.16 million barrels a day by the end of September, al- Baghli said.
But he pledged that Kuwait ″will not dump″ crude on the market and force prices down sharply, saying that sales would be increased gradually.
″We will act in a responsible way,″ al-Baghli said. ″The market is able to absorb those quantities easily.″
Demand for OPEC oil is expected to run about 24.2 million barrels a day in the third quarter. Consumers in Europe and the United States use more gasoline in summer for vacation driving.
Kuwait, knocked out of the oil market by Iraq’s 1990 invasion, wants to pump more oil so it can recover the $50 billion costs of the war and reconstruction.
Analysts said OPEC, which is viewed as weak for its inability to enforce its accords, again fell short of its goal of unity.
″It’s not an agreement,″ said Vahan Zanoyan, senior director of the Petroleum Finance Co. in Washington. ″They failed to address the hottest issue - Kuwait’s demands - properly.″
Senior delegates to the meeting predicted that even if Kuwait opens its taps wider, the other OPEC nations will abide by their quotas.
″I expect there will be adherence because the stakes are so high,″ said Venezuela’s oil minister, Alirio Parra. ″What’s more important for any producer is revenue, not barrels.″
The average price of an OPEC marker is more than $3 a barrel below the group’s $21-a-barrel benchmark.
The conference, which formally opened on Tuesday, saw an unusual alliance on price goals between Saudi Arabia and Iran. The two urged restraint and said they wanted higher prices.
Saudi Arabia, the world’s No. 1 crude supplier, tends to favor moderate prices while Iran fights for much higher ones.
Senior delegates said the ministers decided not to extend the meeting another day in a bid to win Kuwait’s backing because the emirate showed no willingness to soften its demands.
OPEC members are: Algeria, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezeula. Ecuador pulled out earlier this year.