OPEC Keeps Lid on Oil Production Targets - Global Business

HOUSTON - The OPEC ministers did not reach a consensus on Wednesday on rising levels of oil production, leaving quotas in place, despite rising world prices.

The lack of action, however modest, was a setback for Saudi Arabia, which had advocated a change in production quotas that had been set three years ago. But it is likely to have a little more symbolic importance as the organization is now pumping about 1.5 million barrels above the quota level anyway and Saudi Arabia has been increasing production in recent weeks by about 200,000 barrels per day.

Iran led the bloc of countries opposed to changing the quotas, even if it was above his own allocation of approximately 50,000 barrels per day for over a year to raise money to fight against sanctions economic. Some experts said that Iran's oil, which holds the presidency of the Organization of Petroleum Exporting Countries this year was simply maneuvering to undermine Saudi Arabia's traditional adversary.

reference price of oil rose in response to the surprise outcome, but only modestly, by just over a dollar a barrel.

"Everybody in OPEC is cheating and everyone knows that," said Fadel Gheit, Oppenheimer oil analyst and CEO. "Do not listen to what they say, but look what they doing. "

The decision comes at a time when the international oil markets are tightening, with declining stocks in many parts of the world. The U.S. Department of Energy estimates that this week that global oil consumption will increase by 1.7 million barrels per day, mainly because of the increasing use of oil for electricity generation in China, Japan and the Middle East.

Meanwhile, the crisis in Libya took over 1.3 million barrels per day off the world market, and unrest in Yemen and Syria have removed as much as 300,000 barrels per day.

The International Atomic Energy, the Paris-based organization, which represents industrialized countries, reacted to OPEC's inaction with concern. "We noted with disappointment today OPEC members were unable to agree on the need to make more oil available to the market," the IEA said in a statement. "A further tightening the market and the potential increase in prices could jeopardize the economic recovery."

But the organization also noted that "what really matters is the actual offer."

Libyan exports slowed since around March, Saudi Arabia has assured the importing countries that would support production. As the only member of OPEC spare capacity considerable, estimated at 2.5 to 3 million barrels per day, Saudi Arabia is the only OPEC member that has the ability to support supplies and curb price increases.

"Ultimately, this is how much extra oil Saudi Arabia can or is willing to put on the market," said Amy Myers Jaffe, an energy analyst at Rice University. "Who cares what Iran says? It does not matter. The countries produce what they think is best for their financial needs and long-term strategy."

Iran has managed to block Saudi Arabia, largely because it assumes the presidency. The organization is likely to meet again in three months to Iran to reconsider its decision.

Relations between Iran and Saudi Arabia, never particularly warm, these are tense days during the sectarian crisis in Bahrain. Saudi Arabia has sent over 1,000 soldiers in Bahrain in March to help put the predominantly Shiite Sunni protests against the monarchy. Saudi Arabia accused Iran of inciting the protests, and Iran has criticized Saudi Arabia and Bahrain for repressive policies.

The current quotas of OPEC have been set by the organization of 12 countries in December 2008 when oil prices were falling at the beginning of a global recession. The quotas put a floor on prices slump and kept prices moderate and stable for over a year. But as prices began to rise, many OPEC members have started to cheat, which makes the current quotas little more than a landmark in the shade.

With oil prices rising by more than 35 per cent last year, a debate has emerged within OPEC about what to do about them. Saudi Arabia has led the members who want to help save the economic recovery at moderate prices, while Iran and Venezuela have resisted. Most OPEC countries, including Saudi Arabia, saying that speculators rather tight supplies are the cause of rising prices.

"No formal decision has been reached on a production agreement," OPEC said in a brief statement after the closed meeting. "However, the organization continues its longstanding commitment to order and stability of the international oil market."

Greek Leaders Fail to Reach Consensus on Austerity

At an emergency meeting Friday, the country's political leaders failed to agree on the austerity measures proposed by the government, but Prime Minister George Papandreou said there was still the hope that an agreement would be reached.

"Basically, there are many points on which we can agree," he said, addressing the nation in a televised speech. "But there is a need for political will on all sides."

"Over the next few days, we will continue our efforts to reach a consensus, he said, adding that" the government has assumed responsibility for extracting the country from the crisis and do so with or without consensus. "

But leaders of opposition parties have refused to fall behind the president, Karolos Papoulias, who had convened the meeting. The measures were proposed by the Socialist government of Mr. Papandreou.

The purpose of Friday's meeting was to convince the representatives of the European Union and the International Monetary Fund that Greece is serious about repairing its finances and has the political will to impose increases of taxes and spending cuts on a public already weary after a year of belt tightening. The effort came as speculation mounted about the ability of the Greek government to avoid default, which would very likely lead to another financial crisis across the euro area.

Olli Rehn, European Commissioner for Economic and Monetary Affairs, said in a statement that the committee "regrets the failure of the Greek party leaders to reach a consensus on economic adjustment to overcome the current crisis of debt."

"An agreement must be found quickly," said Rehn. "Time is running out."

Earlier in the day, Antonis Samaras, the leader of the country's main conservative opposition party, New Democracy, said he would not back a program that "shaving Greek economy and destroy society ".

He called for the renegotiation of the terms of an agreement with the union and the IMF, which last May has promised € 110 000 000 000 in loans to Greece in exchange for the country's finances in order.

Mr. Samaras also reiterated calls for an alternative approach to the finances of Greece, one that has favored tax cuts and accelerated privatization of public assets.

Other leaders have also criticized the Socialists' plan. Among them was the leader of the Communist Party, Aleka Papariga, who said the Greeks were subject to "ideological terrorism" and must not yield to the "coercive dilemmas."

On Thursday, the group leader of euro zone finance ministers, Jean-Claude Juncker, said again that the EU would be unlikely to intervene if the IMF withheld its portion of a fifth round of funding emergency to Greece - 12 billion euros (17 billion dollars) should be paid next month.

Lenders of Greece require additional steps after the country missed its target deficit for 2010, with the objectives for this year and beyond the reach further. A mission of the European Commission, IMF and European Central Bank is trying to compile a long-awaited report on the progress of the Greek government, after which European ministers will decide how to react.

The situation is difficult because public opinion in creditor countries hardens and some governments in the euro area, including the Netherlands, made it clear they will not step in and fill the funding gap if the IMF does not believe it can justify the release of his party. This has increased pressure on the Greek government to accept revenue measures, including privatization, it will be enough to win the IMF

Within the Group of 8 meeting in Deauville, France on Friday, the U.S. has expressed its support for European efforts to avoid a debt crisis in Greece from propagating in a bigger problem for the Monetary Union Euro, two European diplomats who were present during the discussions but declined to be named.

The Americans said that Europe's ability to manage these problems was important for the United States, but that Obama did not specify what assistance the United States would be willing to extend to the Except for statements of support, the diplomats said.

EU leaders said during the discussions that Europe's problems were limited to Greece and they did not think Greece might infect the rest of the eurozone, which covers 17 countries. They underlined the continued strength of the euro vis-à-vis the dollar as evidence that the situation was still under control.

The leaders agreed, however, that Greece should be more aggressive in adjusting its own finances, and said they believed the country would finally be able to avoid default or restructure its debts .

Greek media speculated last week that the country will hold early elections or perhaps return to the drachma. European Commissioner for Maritime Affairs, Maria Damanaki, a Greek socialist, oil on the fire when she said Wednesday that negotiations were already in place on the way out of Greece in the euro area.

Further tax increases and cuts in public spending, the program of the Greek government austerity drive also includes a proposed privatization expects sales in the issues of public services and state assets, including the national telecommunications company OTE .

On Friday, Deutsche Telekom, which already holds a 30 percent in OTE, confirmed receiving a letter from the Greek finance ministry asking to hold talks to discuss increasing its stake.

But a few dozen employees of the telephone company protested against another sell-off by blocking one of the busiest roads of Athens, in front of company headquarters during the morning rush hour on Friday .

Borrowing Costs Rise for Spain and Portugal

Spain and Portugal on Wednesday managed to raise the amounts targeted in their auctions later debt, an important test of market confidence in the midst of negotiations in Lisbon for a financial rescue plan and attempts to Madrid avoid having one.

Spain sold € 3370000000, or $ 4.9 billion debt, with the average yield on the benchmark bond 10 years rising to 5.47 percent from 5.16 percent last month. The auction has met with strong demand and was at the upper end of its target. This is an improvement over a Treasury bill auction on Monday, when Spain barely managed to reach its minimum goal despite offering higher rates to investors.

Portugal also had to offer higher rates in the sale of € 1 billion of treasury bills in the short term, but reached its goal and drew strong demand. Analysts suggested that the result will encourage the Portuguese Treasury to sell more short-term debt while its bailout plan talks continue.

The bond auction came amid worries that the financial difficulties of struggling economies euro are far from resolved - even those countries that are already saved, such as Greece.

Athens received a bailout € 110 000 000 000 last year, but perhaps even to restructure its debt because of the unbearable cost to repay investors in interest rates in double digits.

The Greek Finance Minister George Papaconstantinou on Wednesday again ruled out such a move, telling reporters in Athens that he held "enormous dangers to Greece for Greek banks, for households," according to Bloomberg News . But these statements have failed to convince investors.

Meanwhile, significant gains in elections last weekend in Finland by nationalist politicians, who are skeptical of having to bail out the euro member colleagues, have raised concerns about completing the first aid kit required by € 80000000000 Portugal.

In the auction Portuguese Wednesday, yields on six-month bills rose to 5.53 percent from 5.12 percent at the last auction on April 6.

"The financing costs are up a substantial because of the contagion effect of the restructuring talks Greek, which could revive fears of contagion," Chiara Cremonesi, fixed income strategist at UniCredit, wrote in a note to investors concerning Spain and Portugal. "The good news is that demand was healthy, and that will reassure investors."

The market sentiment has fluctuated in recent months amid conflicting signals from European politicians about their willingness to provide additional funding to countries that have already requested a rescue operation and prepare for possible rescue operations further. In particular, any bailout of the Spanish economy, which is larger than that of Greece, Ireland and Portugal combined, could put the survival of the euro in question.

At its last auction of 10-year bonds, for example, the Spanish Treasury has managed to slightly reduce its borrowing costs after an agreement in mid-March by European leaders to strengthen the European stability financial provision for the installation of rescue troubled economies, and allow the possibility to buy public debt under certain conditions.

Since then, however, the European political landscape became more fragmented because of the fall of the Portuguese Government and the outcome of elections in Finland.

Representatives of the International Monetary Fund, the European Commission and European Central Bank has arrived in Lisbon last week to begin negotiating the terms of a bailout. Their goal is to complete a deal by mid-May, before the general elections scheduled for June 5 June is also the month when Portugal is facing its most difficult obstacles to refinancing of the year.