The Organization of Petroleum Exporting Countries (OPEC) faces a dilemma over oil output, prompting member countries to strictly comply with the limitation of a daily production ceiling of 28.8 million barrels of crude oil.

This means an average daily output cut of 520,000 barrels, OPEC's President Chakib Khelil told reporters after the prolonged 149th OPEC Ministerial Conference Wednesday.

OPEC has in fact kept last year's official production limit. Experts here said OPEC's symbolic output cut can be seen as a signal: While OPEC would not see oil price diving, the oil cartel has tried to keep a balance between reasonable profits and market acceptable price by cutting only part of the overproduction to help stabilize the crude oil market.

According to a production increase decision made on OPEC Ministerial Conference last September, the total daily crude oil production by all member countries excluding Iraq should not exceed 29.673 million barrels from last November. However, statistics show that this limitation has long been broken.

In recent months OPEC's actual crude oil production has been on the rise along with the rising international oil price. Its average daily production this July was 32.6 million barrels and even higher in August, reaching 32.8 million barrels.

Saudi Arabia alone raised its daily production by more than 700,000 barrels, although it had announced a daily increase from this May of only 300,000 barrels under the pressure of large oil consumption countries like America.

Many other OPEC member countries, such as Iran, Nigeria and Angola, also raised their output by big margins.

However, international crude oil prices have dropped continuously since July this year, with OPEC's weekly average prices dropping from 138.31 US dollars per barrel (dpb) on the first week of July to 104.39 dpb in the first week of September, or a decrease of nearly 25 percent in two months. The daily average prices have also declined from a record high of 140.73 dpb on July 3 to 101.08 dpb on September 8.

The declining oil prices raised some OPEC members' concern. Some OPEC countries, particularly Iran, OPEC's second largest oil producer, called for an output cut to curb the price decline.

Before the current OPEC ministerial conference, Iranian Oil Minister Gholamhossein Nozari had noted that currently there is no shortage of oil supply, but overproduction, considering an oil price of 100 dpb as a reasonable bottom line.

However, OPEC's largest oil producer Saudi Arabia, with its output accounting for one third of OPEC's total, has different views. Its Minister of Petroleum and Mineral Resources Ali al-Naimi put the bottom line at 80 dpb.

Meanwhile, head of Libyan delegation Shukri Ghanem, Venezuelan Minister of Energy and Petroleum Rafael D Ramirez and some other high ranking delegates from OPEC member countries had made it clear that they believed the crude oil output "should not be changed" even before the Tuesday ministerial conference.

They said a cut on oil output quota will have negative impacts on international oil market, even trigger another oil price surge, thus further handicapping world economic growth with excessively high oil prices.

Analysts said that earlier price surge served to curb global oil consumption, noting that high oil prices and economic downturn have shrunk crude oil consumption in the United States, the biggest oil consumer in the world. Over the past four weeks, the average US daily supply of petrol products has dropped 3.5 percent compared with the same time last year.

For oil producers, high oil prices are a double-edged sword, said some analysts. While they can bring oil producing countries higher and quicker profits, they may hinder economic growth, which will in turn reduce crude oil consumption, and prompt more oil consumers to search for alternative energy, thus harming the long-term benefits of oil production countries.

Hours before the OPEC ministerial conference, oil prices on London Market dropped further to 99.50 dpb, the first below 100 dpb dive since April 2 this year. Oil prices on New York market also dropped to 103.87 dpb, touching a five-month low.

The continuous drop of oil prices may prompt all OPEC members to strictly comply with their output quotas so as to guarantee their profit.

(Xinhua News Agency September 11, 2008)