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Saturday, 17 March, 2001, 18:34 GMT
US frowns on Opec cut



Opec Secretary General Ali Rodriguez breaks the news

The United States has expressed disappointment at Opec's decision to cut oil
output by one million barrels a day in an attempt to drive up prices.
US Energy secretary Spencer Abraham said the decision underlined the need to
step up American oil production.



Opec's decision demonstrates the importance of increasing America's domestic
production and developing a national energy policy

Spencer Abraham
Opec energy ministers announced their decision, which will come into effect
from 1 April, at an Opec meeting in Vienna on Saturday

Mr Abraham said: "Opec's decision demonstrates the importance of increasing
America's domestic production and developing a national energy policy that
will ensure a stable, reliable, affordable and diverse energy supply."

An Opec statement had earlier stated: "The conference has taken the decision
to stabilise the market. The present weak world economy and the traditional
downturn in demand... both clearly point to a need for a correction."

Close monitoring

The 11-member grouping added that it would monitor the market closely, and
would take "immediate" further action if necessary.



This is a good price for both producers and consumer

Opec Secretary General Ali Rodriguez
A reduction of one million barrels a day represents a 4% cut in Opec output -
the cartel pumps 40% of the world's oil.

The production cut comes despite warnings by analysts that a substantial
reduction in oil supply could cause a world recession, with both industry and
consumers suffering under higher prices.

Some oil ministers had demanded an even bigger cut, but Opec countries were
under huge political pressure not to go any further.

Mr Abraham noted that President George W. Bush wanted to increase US energy
security by reducing reliance on imported oil.

Added taxes

Opec Secretary General Ali Rodriguez downplayed concerns that a
larger-than-expected cut would hurt consumers and industrialised countries by
pushing up crude prices.

"This is a good price for both producers and consumers," he said.



Oil prices have tumbled from a high of $35 last year

Opec's Algerian president Chakib Khelil meanwhile renewed the cartel's
criticism of governments for levying high taxes, while blaming Opec for the
price of end products like petrol.

"Consumers do not pay only the cost of crude oil. They pay also the cost of
taxes, and taxes are a heavy burden on the citizens of the EU and the US and
other countries," he said.

Oil prices have remained relatively low, despite the prospect of a cut in
supplies.

But analysts say there is a good chance that this latest deal will do what
Opec wants, adding two or three dollars a barrel to the price of crude oil
over the next few months.

Protecting revenues

The cartel is anxious to protect the revenues of its member governments.

Only two years ago, they were struggling with oil prices at less than half
their current level.

And prices have fallen more than 25% since touching a 10-year high - above
$35 a barrel - late last year.

It is also an important issue for many oil importing countries outside Opec.

Several sent delegates to the meeting, including Mexico, Kazakhstan and
Angola.

Russia was also represented. Its recovery after the financial crisis of 1998
owes a great deal to the relatively high oil price of the last year.




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