VIENNA, Austria – Historically high crude costs may signal "a new price era," a senior OPEC official said Tuesday, insisting that the 11-nation cartel is doing all it can to bring prices down to more reasonable levels.
Mohammed Barkindo, acting secretary-general of the Organization of Petroleum Exporting Countries, defended the group's decision Monday to keep its production target of 28 million barrels a day unchanged.
OPEC made clear that it would keep close tabs on prices, which have recently fallen to five-month lows, and consider a cut in output quotas later in the year.
Barkindo said a key reason was high commercial inventories, which he said totaled 1.2 billion barrels -- the largest stocks since 1997.
Although crude has dropped by almost US$13 since midsummer, prices overall have increased fourfold since 2001, he said.
"It is the volatility that should most concern the industry," Barkindo told a post-meeting conference in Vienna, cautioning that the fluctuations could herald "a new price era."
"OPEC has been doing as much as it can to restore prices to reasonable levels," he said.
Oil prices rose above US$66 a barrel in electronic trading Tuesday.
The International Energy Agency lowered its expectations of global oil demand growth for this year and next, citing economic weakness in Europe and parts of Asia. "There is a broad consensus that the risks to growth are increasing," it said.
In its monthly oil market report, the energy watchdog cut 100,000 barrels a day from its earlier growth projections for 2006. It also said OPEC's output fell by 270,000 barrels a day in August. The IEA cut its estimate for demand for OPEC crude in the third quarter of this year by 400,000 barrels a day.
OPEC conceded Monday that supplies are "more than adequate" to satisfy world demand. Including Iraq, which is not bound by the quota system, OPEC's daily production is roughly 30 million barrels.
Supplies remain ample despite concerns over Iran, chronic outages in Iraq and attacks on oil infrastructure by militants in Nigeria -- Africa's biggest producer. U.S. inventories are at their highest levels since 1998, the Department of Energy reported last week.
But the group, which produces about 40 percent of the world's crude, is keeping its options open in case prices don't stabilize. OPEC President Edmund Daukoru, who is also Nigeria's oil minister, said he would consult with other members "should market conditions warrant" action before they meet again in December.
Key members conceded that some of the factors that had held prices aloft are gone.
Light sweet crude hit a record US$78.40 in mid-July, just after fighting erupted in Lebanon, but the hostilities have ended -- and tensions over Iran's suspect nuclear program, which also stoked prices, are easing amid progress in talks aimed at averting U.N. sanctions.
Each US$10 drop in price, analysts say, translates into a 25-cent drop at the gas pump. In the U.S., retail gasoline prices average US$2.62 a gallon.
Some OPEC ministers, including Iran's Kazem Vaziri Hamaneh, had suggested that prices shouldn't be allowed to fall below US$60.
Analysts said one alternative to formally cutting production targets, which could unsettle markets and send prices soaring again, could be to have members quietly and informally pump less.
Daukoru expressed concern Monday that prices could face further pressure in 2007 if production from non-OPEC nations such as Angola, Brazil and Caspian Sea countries like Azerbaijan rises significantly as expected.
In the longer term, however, he expressed confidence that OPEC's market share would increase because the outsiders can offer only crude that needs more refining, not the higher-quality light sweet crude that the cartel offers.