WORLD OPEC plans to decide on prices, oil output

Low output from Iraq and high demand from China have raised oil prices.
DALLAS MORNING NEWS
As OPEC members meet this week, they'll face conflicting signals about their oil output and the state of the world market.
Low oil inventories and volatile prices have made market forecasting difficult. But analysts have been warning since last fall that oil supplies could face a quick buildup in the second quarter of this year, putting pressure on the cartel to cut its output now to prevent a sudden price drop.
The decision by the Organization of Petroleum Exporting Countries, when it convenes for its next meeting Tuesday in Algeria, will play a big role in determining the direction of gasoline prices this summer.
It could also affect election-year politics in the United States, as lawmakers wrangle over federal energy policy amid growing concerns from consumers over their higher energy bills.
"OPEC's got a lot of work to do," said John Gerdes, an analyst at Southwest Securities Inc. "The more they delay making these cuts, the sloppier the market is going to get. They know that, but they're hamstrung by these high prices and the political consequences of cutting against high prices."
Expectations
With OPEC already producing at higher levels than it established last fall, many analysts expect OPEC members to maintain their existing quotas and seek better compliance to those levels. The 11-nation cartel is scheduled to meet again next month.
After the war last year, few analysts expected oil prices to stay so high for so long. But Iraq proved them wrong. It took the rest of the year to deal with looting and sabotage in Iraq's oil fields and to restore production, which is still below pre-war levels.
That helped keep supplies tight around the world. U.S. oil inventories have been at historically low levels for weeks.
Since the fall, analysts have projected that oil prices would fall in the second quarter, when demand drops after the winter heating season.
But demand has stayed high from other factors, with much of the strength coming from growing Asian economies.
"The wild card that everybody keeps seeing is China," said David Freyman of Barnes and Click Inc., a Dallas-based consulting firm. "They keep importing a lot of crude oil, and that's helping to keep the price up."
Gasoline prices are high already, largely because of the high crude oil prices. A gallon of regular unleaded averaged $1.63 nationwide Friday, 9 cents more than a year ago and 10 cents shy of the noninflation-adjusted record last August, according to AAA.