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OPEC rethinks oil output cuts as U.S. economy lags
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09:58, March 04, 2008

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With high oil prices weighing on a struggling economy, the OPEC oil cartel is reconsidering its plans to cut production, a move that could push prices above their current record levels, The New York Times reported Monday.

Instead, OPEC is likely to keep output unchanged when its members meet Wednesday, the report said.

When the Organization of the Petroleum Exporting Countries gathered in Vienna last month, the group suggested that it might curb production soon to make up for a seasonal decline in oil demand.

Since then, however, oil prices have risen above 100 dollars a barrel and the economic picture in the United States, the world's leading oil consumer, has darkened significantly.

The report said that oil prices usually fall between the peak winter and summer seasons. Typically, refineries prepare to shut down for annual maintenance and oil consumption is lower.

But while recent data indicates that oil inventories are increasing and Americans are curbing their energy use, the price of oil has been reaching new records.

"Even if OPEC is worried about a drop in demand, they don't want to be blamed for a recession," Adam Sieminski, chief energy economist at Deutsche Bank, was quoted as saying. "That would be bad public relations. so they will do nothing."

Earlier, Commerce Department figures showed that the U.S. economic growth nearly halted in the fourth quarter of 2007, expanding by only 0.6 percent, compared with 4.9 percent in the third quarter.

Whatever OPEC does, analysts expect oil prices to remain high this year, said the report.

According to a monthly survey of analysts by Reuters, oil futures are forecast to average 83.87 dollars a barrel, 2.54 dollars a barrel more than the previous survey's estimate. In 2007,oil averaged 72 dollars a barrel, the report said.


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