Faced with no other choice, OPEC oil ministers said Thursday that the cartel's members will continue pumping crude at current levels despite a dramatic drop in oil prices since the terror attacks on the United States.
"We decided not to change anything at the present time,'' Iranian Oil Minister Bijan Namdar Zangeneh told reporters before the formal meeting began at OPEC headquarters in Vienna, Austria.
No Political Options
Although oil prices have plunged to alarming lows since the attacks, the Organization of the Petroleum Exporting Countries is constrained from cutting output to bolster prices because such a step could tip the fragile world economy decisively into recession.
OPEC's room for maneuver is limited further by the reluctance of key members to antagonize the United States, the No. 1 importer of OPEC crude, as it leads a military alliance against Afghanistan's Taliban regime and the forces loyal to Osama bin Laden, the prime suspect in the attacks on New York and Washington.
Group members are also wary of being perceived as greedy if they try, so soon after the terror attacks, to push prices higher by cutting production.
"You would be seen as trying to gain from the misfortune of others,'' said Leo Drollas, chief economist of the Center for Global Energy Studies in London.
Traders agree. "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,'' Peter Gignoux of Schroder Salomon Smith Barney said.
OPEC members reached the agreement on Wednesday but postponed confirming it until Thursday's formal meeting. The delay underscores the difficulty its 11 member nations face in trying to reach a consensus amid the intense economic and political unease prevailing since the Sept. 11 attacks on the United States.
OPEC president Chakib Khelil extended the group's condolences to the families of the victims of the attacks, before describing the negative effects the attack have had on global demand for oil.
"The impact of the disaster upon the international oil industry will be profound, particularly in the context of the global economic slowdown and its implications for energy demand,'' he told delegates at the start of the meeting.
Cut May Happen at Next Meeting
OPEC will reconvene on Nov. 14 to review market conditions and cut output at that time if necessary.
OPEC officials met late Wednesday at the cartel's headquarters in Vienna, Austria, to coordinate a common production strategy with officials from eight non-OPEC oil producing countries including Mexico, Russia and Angola.
The cartel has cut back its official production three times this year already, most recently by 1 million barrels a day on Sept. 1.
But many OPEC members are still producing well above their individual quotas, for a total that analysts estimate ranges from 700,000 to 1.5 million barrels a day. All told, OPEC supplies almost two-fifths of the world's oil.
The group's immediate challenge is to reach a consensus about prices, which, after spiking to $31 a barrel after the Sept. 11 attacks, have since tumbled.
However, the warning signs of a global recession - lower company earnings, large cuts in jobs, reduced air travel - are perhaps the biggest factor in the recent sell-offs on oil markets. Recession fears, and an accompanying drop in demand for crude, have worsened since the attacks on New York and Washington.
Some OPEC oil ministers worry that cascading oil prices might trigger a rout comparable to that of December 1998, when crude plummeted to as low as $10 a barrel.
On Wednesday, November contracts of North Sea Brent crude hit a low for the day of $20.70 a barrel before rebounding to finish 62 cents higher to $23.00 a barrel on the International Petroleum Exchange in London.
Contracts of light, sweet crude for November delivery moved higher on the New York Stock Exchange, finishing up 57 cents to $22.38 a barrel.
Reuters and the Associated Press contributed to this report.
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