VIENNA, March 31: The Organisation of the Petroleum Exporting Countries (OPEC) agreed on Wednesday to turn down the taps despite calls from the United States for cheaper fuel.
The United States had pressed OPEC to lift export restrictions to help control prices at the pump and prevent energy inflation slowing economic growth. Delegates said cartel powerhouse Saudi Arabia led the push for implementing cuts of one million barrels a day or four per cent from April 1, as first agreed in Algiers in February.
"The Saudis have gone from being a reliable OPEC price dove to OPEC's arch price hawk," said independent energy consultant Mehdi Varzi. "That's because of the demands of the Saudi budget. They need higher and higher oil prices every year to meet current expenditure for a larger and larger population."
The White House stopped short of openly criticising OPEC but called for adequate supplies. A spokesman said: "It is important for producers not to take actions that hurt our economy."
OPEC blames speculative investment funds, now commanding record positions on energy contracts, for this year's oil price spike. Gary Ross of leading United States energy consultancy PIRA Energy said: "We estimate speculative funds have already invested $15 billion in oil futures contracts in New York and London. This decision is only going to encourage the speculators to stay long on oil markets."
PRICES FALL: Oil prices fell sharply after the deal. A big weekly build in US crude inventories led the slide but expectations among traders that OPEC will be slow to enforce lower quota limits also undermined prices.
Benchmark US crude dumped $1.25 to $35.00 a barrel, down from a recent peak of over $38 on the New York Mercantile Exchange. Saudi Arabia's regional Gulf allies Kuwait and the United Arab Emirates had recommended OPEC consider delaying tighter output restrictions to allow oil prices to cool.
The unusual division among OPEC's core Gulf members raised speculation that the United States is now targeting Kuwait and the UAE, instead of Saudi, for diplomatic efforts aimed at getting lower prices. -Reuters
