Signs Indicate OPEC Will Reduce Oil Production

Faced with the upcoming periodic meeting of the Organization of Petroleum Exporting Countries (OPEC), which will determine whether or not members will reduce the amount of oil production, major oil manufacturers such as Saudi Arabia have driven forward in support of a large-scale reduction.

In addition, the expectation that OPEC will reduce the oil supply has become prevalent and the international oil market has been fluctuating.

In particular, anxieties have been stirred because it may bring out a further delay in world economy recovery, including Korean economy, because an increase in oil prices is directly connected with the plunge in consumption.

On March 31, the oil ministers of six countries, including Saudi Arabia, Iran, and Venezuela, urged that the plan of oil supply reduction should be accepted at the OPEC meeting, which was held on this day at Vienna, Austria.

In advance, the Saudi oil minister disclosed that “OPEC should abide by the agreement of the February meeting that decided to reduce the daily supply of oil by one million barrels per day from April 1. In Saudi Arabia, the plan has been already carried out.”

In accordance with this address, the Financial Times, on March 31, anticipated that “the decision to reduce oil production will materialized in near future because major member countries of OPEC support the plan.”

Bloomberg, one of the major economic news providers in the US, predicted that “the oil price will reach 40 to 42 dollars per barrel, which is the price level of the Gulf War period.”

OPEC’s decision will come out at around April 1 in local time.

The uncertain condition of the economy due to the reduction of the oil supply has hit the international oil market hard.

Dubai Oil, based on March 30’s transactions, converted to an upward tendency in four days by recording $30.49 per barrel, up $0.36 from the previous day. WTI, west Texas oil, showed a $0.81 increase, recording $36.19 per barrel. North Sea oil, Brent Oil, has been marked up $0.88, finishing at $33.08.

In addition, gasoline prices in the United States have shown a five-day streak of consecutive highest-ever prices, averaging $1.753 per a gallon, which is approximately 3.8 liter, up $0.03 from the previous day.

Goldman Sachs, an international investment bank, predicted that “due to the skyrocketing oil price, the economic growth ratio of the seven advanced countries will be slowed down 0.3% through the next nine to 12 months.”

According to Korea Bank, a five-dollar increase in oil price will result in a 0.3 percent reduction in the Korean economy growth rate, and boost public prices up 0.5 percent.

Ki-Jeong Ko Kwon-Heui Hong koh@donga.com konihong@donga.com