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Thursday, 27 September, 2001, 14:55 GMT 15:55 UK
Opec keeps oil production steady
Previous Opec conference in Vienna
Opec ministers must stabilise a volatile oil price
Major oil producing countries have resisted calls to support the flagging oil price by implementing output cuts.

Members of the producers' cartel Opec have bowed to concerns over the impact a cut in oil supplies would have at a time of international tension.

Attempts to underpin oil prices, which have approached two-year lows, would have been broadly condemned, observers warned.

International oil prices have lost over a quarter of their value in the past two weeks.

Opec delegates plan to meet again on 14 November to review market conditions and said they would cut output at that time if necessary.

Hold steady

Saudi Arabian Oil Minister Ali al-Naimi had earlier urged caution, after a series of officials hinted at moves to raise oil prices.

Saudi Arabian Oil Minister Ali al-Naimi
Ali al-Naimi: "Opec should not rush decisions"

"Let us not take drastic action," he said. "Opec should not rush into decisions.

"We must hold steady and watch this for a while."

The reports were welcomed by market-watchers including Bob Finch, head of Vitol in London.

"Opec has done the only thing possible," he said. "And I applaud them for not doing anything rash."

Opec dilemma

International crude oil prices soared after the terror attacks on the US, as consumer nations feared supply disruptions from the Middle East.

But prices have since tumbled as supplies remained unaffected, and demand for fuel waned amid the slowdown in the global economy.

The combination of low prices and political unrest left Opec states, which produces two thirds of the world's oil, losing out to some extent whichever course they chose.

"It is a no-win situation for Opec," said consultant Yasser Elguindi of Medley Global Advisors.

"If they cut they stand to lose a lot politically while gaining very little."

Back down to $12 a barrel?

The perceived difficulty in cutting output has helped oil prices approach levels not seen since 1999 when the Asian economic crisis depressed demand and sent prices into freefall.

Brent crude oil was trading around $23 a barrel on Thursday.

"A lot of people are talking of the potential to spike down to $15 or even $12 a barrel," said Redtower Research chief strategist Gerry Celaya.

GNI Research analyst Lawrence Eagles agreed, predicting crude oil to trade in the range of "$16-$20 next year if the economy remains depressed".

"I think it could go sub $20 for Brent," added ABN Amro's Nauman Barakat.

Opec aims to keep oil prices within a range of $22 to $28 per barrel, and has cut output three times already this year in an effort to support prices.

The BBC's Patrick Bartlett
"Oil ministers arriving here have been unusually guarded in their comments"
The BBC's Emil Petrie
"There is pressure to cut production and force the price of oil back up"
Julian Lee of the Centre for Global Energy Studies
"We are in a very different world"
See also:

25 Sep 01 | Business
BP cuts petrol prices
24 Sep 01 | Business
Oil prices sink to year low
17 Sep 01 | Business
Oil reverses post-attack surge
13 Sep 01 | Business
Attacks shake oil and gold prices
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