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Opec's Rilwanu Lukman
"$25 is the correct price level we aim for"
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Friday, 3 March, 2000, 12:28 GMT
Opec's target - $25 per barrel
Ali Naimi (left), Mines Rodriguez (centre) and Luis Tellez (right)
Ministers from Saudi Arabia, Venezuela and Mexico promised to bring down prices
The price for crude oil should stabilise at about $25 per barrel, according to Rilwanu Lukman, the outgoing secretary-general of the Organisation of Petroleum Exporting Countries (Opec).

A barrel of Brent crude oil - the market's benchmark - currently sells at just under $30 - its highest level for nearly 10 years. One year ago it cost as little as $10.

This market needs to see real barrels, not promises. That's what's going to bring prices down.

Peter Gignoux, Salomon Smith Barney
In a BBC interview Mr Lukman said recent production cuts had pushed up oil prices too much. He argued that it would be in the interest of both producers and consumers to stabilise the price at a "correct level".

"We don't want prices to see-saw," he said.

At the next official Opec meeting on 27 March ministers are expected to agree on a small increase in production quotas, which could nudge down prices.

$60bn loss

According to Mr Lukman, the slump in oil prices one year ago cost oil producing countries between $50-60bn in revenue.

Since then production cuts have pushed up prices, but Opec's figurehead points out that they are not unusually high.

"Three to four years ago prices were at $25, $26 a barrel before they came down precipitously to $10 a barrel," Mr Lukman said.

On Thursday, ministers from three major oil producing countries agreed to increase production, but failed to give a firm committment to do so significantly and quickly.

Venezuela, Mexico and Saudi Arabia said that "an increase in production is warranted", in the words of Mexican oil minister Luis Tellez.

"We recognise that there is a need for additional production," added Saudi Arabian oil minister Ali al-Nuaimi.

Saudi Arabia, the world's largest oil producer, will present the recommendations of the meeting to fellow Opec members.

US Energy Secretary Bill Richardson
US Energy Secretary Bill Richardson: Opec takes a "step in the right direction"
Opec produces 30% of the world's oil. After holding the world to ransom in the 1970s with punishing production cuts and price increases, the organisation failed to present a common front during the 1980s and 1990s.

Only now have oil producers finally managed to agree and keep to production quotas once again.

It is believed that the ministers will recommend that Opec increases production by 1.2 million barrels per day (bpd) from April, reversing some of the 4.3m bpd cuts made since 1998.

But supply is so squeezed that even this increase might not be enough to ease prices.

Peter Gignoux, analyst with Salomon Smith Barney, said: "This market needs to see real barrels, not promises. That's what's going to bring prices down."

US pressure on prices

Oil producers - both members and non-members of Opec - have come under intense pressure from the United States to bring down prices.

On Thursday President Bill Clinton promised US legislators that he would release oil from the national emergency stockpiles to force down prices, if Opec did not agree to increase its production.

One congressman recently introduced legislation that would bar military assistance to any oil-exporting country involved in price manipulation.

Major oil producers like Kuwait and Saudi Arabia depend on military support from the United States.

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See also:

26 Dec 99 |  Business
What flows up must flow down
02 Mar 00 |  Business
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