OPEC cuts may crimp economy

[Whoa_Nelly]

OPEC cuts may crimp economy

Output limits seen offsetting expected rise in Iraqi crude

By John W. Schoen
MSNBC



Sept. 24 — Even though the world’s oil tank has been running low this year, OPEC ministers meeting in Vienna Wednesday voted to make a surprise cut in production quotas, amid signs that crude oil shortages are easing. The cartel’s fear, apparently, is that a steady increase in production from Iraq could force world oil prices lower. But some analysts believe that, as long as attacks continue on U.S.-led forces and the Iraqi oil industry, tight crude oil supplies will continue to put the squeeze on energy consumers.

WITH THE LOSS of Iraq’s oil supplies to war and the lingering effects of labor strikes on Venezuela’s oil industry, world oil inventories have been running very low this year. But though supplies still remain tight, the shortfall has begun easing in recent months. In February, petroleum inventories were some 200 million barrels below normal levels, but that shortfall had cut to about 58 million barrels as of August, according to Merrill Lynch.

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Now, with the rebuilding of Iraq’s oil industry underway and the expectation that more of that country’s oil will soon hit world markets, the Organization of Petroleum Exporting Countries decided to tighten the taps a bit to slow the supply build-up and keep prices from falling further.


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News of OPEC’s production cuts — of about 900,000 barrels a day — bumped oil prices back up by $1.15 Wednesday to $28.28 a barrel.

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http://www.msnbc.com/news/971120.asp?0sl=-23&cp1=1

Read on the MSNBC ticker that this may start November 1.