A powerless OPEC could only watch U.S. oil prices resume their slide Tuesday, in a collapse that is threatening to ruin the cartel's successful two-year strategy of keeping oil in a high price band.
U.S. crude for November delivery settled at $21.81 a barrel, losing 20 cents or nearly 1 percent on the day on the New York Mercantile Exchange Tuesday. On Monday, world oil prices plunged by 13 percent in the biggest single-day price collapse since the Gulf War over 10 years ago.
Cartel President Chakib Khelil said the ministers would probably have to postpone any effort to resuscitate prices that now are below the group's $22-$28 target range.
"In the light of what we are witnessing it is dangerous to take a decision one way or the other now,'' Khelil said. "At the moment I see no need to change production levels.'' OPEC would probably meet again in November, he added.
The Organization of the Petroleum Exporting Countries finds itself boxed in by political sensitivities after suicide attacks in the United States and a weakening world economy that is sapping demand for petroleum.
For the time being, said traders, it appears helpless to resist the downturn.
"A hardline OPEC would go down like a lead balloon in the United States and Europe right now and could have very negative repercussions for them in the long term,'' said Peter Gignoux of Schroder Salomon Smith Barney.
Acknowledging world economic difficulties, influential Saudi Oil Minister Ali al-Naimi said that while OPEC retained its price target, the markets would always determine the value of crude.
"Nothing has changed -- we still have a $22-$28 objective, we still have an objective of $25,'' Naimi said. "But we recognize that OPEC does not really control the price -- the price is determined in the market.''
Worse May Be Yet to Come
Dealers said worse could be in store for OPEC if it fails to restore market confidence in the strategy that has seen it maintain prices this year with 3.5 million barrels a day of output reductions.
They said comments from Gulf producer Kuwait on Monday, suggesting it was considering abandoning the high price policy, had undermined the market.
Kuwaiti Oil Minister Adel al-Subaih had said that his country, recognizing global economic difficulties, was happy with prices at the lower end of OPEC's range.
While other ministers insist the $25 target remains intact, the seeds of doubt have been sown.
``Whatever way you look at that comment, it is tantamount to saying that the cartel is happier with a target price lower than $25,'' said Lawrence Eagles of brokers GNI.
``If a target is respected then it provides a psychological prop. Toying with that target can wreak untold harm to the market.''
The outlook for OPEC nations, many of which are basing their budgets on $25 oil, looks decidedly awkward.
OPEC's economists, in a report prepared for ministers, have ratcheted down expectations for world oil demand next year. "It doesn't look good,'' said one representative on the cartel's economic advisory board.
This year's cuts have taken official limits down to 23.2 million barrels a day but leakage, estimated at up to 1.5 million bpd, means actual supplies are running much higher.
Dealers said the market would not take seriously any suggestions of another round of reductions before compliance with existing limits improved.
"What OPEC needs to do is regain the respect of the market by ensuring that compliance is rock solid,'' said Eagles.
"If OPEC decides to take no action they could create a de facto production cut by improving their compliance,'' said Simon Games-Thomas of NM Rothschild bank in Sydney.
U.S. appeals for economic and political cooperation in the wake of the September 11 assaults make it very difficult for OPEC's most influential member, Saudi Arabia, to support any early action to prop up prices.
The United States' biggest oil supplier, Saudi has pledged full support to help provide intelligence to Washington on Saudi-born Osama bin Laden, suspected mastermind behind the attacks.
Reuters and the Associated Press contributed to this report.