Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Oil Hits Target Price No Thanks to OPEC

LONDON -- After years of trying vainly to hit its target price for oil, OPEC finally achieved what analysts call a dubious success.

The Organization of the Petroleum Exporting Countries confirmed Tuesday that its average price for a barrel of crude oil rose to $21.17 per barrel Monday from $20.81 Friday.

This is the first time oil has reached OPEC's target price of $21 per barrel since Oct. 21, 1991.

Analysts suggested the rise was a short-term gain brought on by the combination of extremely cold weather and low oil supplies in the United States -- factors outside OPEC's control. In London trading early Tuesday, oil prices were even dipping slightly.

"May I suggest it's absurd the way they put it -- their target?" said Leo Drollas, chief economist at the Center for Global Energy Studies in London. "It has very little to do with them. They've sort of hit it by accident."

Unfortunately for the oil cartel, the price has gone up just as the specter of Iraq re-entering the market is getting stronger. Iraq resumes talks April 8 with the United Nations about limited sales of crude oil so it can buy food and medicines.

Drollas said that whether or not the Iraqis agree to UN conditions for the oil sales, after a ban that began with Iraq's August 1990 invasion of Kuwait, OPEC will face more troubles from a bigger supply of non-OPEC oil coming onto the market later in the year.

"We'd like to see how they feel in six months' time, when prices are going south," Drollas said. "They're bound to head for a crash."

He said he believes hitting the target will make OPEC complacent about higher supplies that will continue to plague the cartel.

Iraq's eventual return to the market will aggravate the situation because the other OPEC members are already pumping more than their supply ceiling of 24.52 million barrels a day, and it remains unclear how they will agree to make room for Iraqi oil.

The recent rise in oil prices probably won't have any huge effect on consumers, though gasoline prices in the United States rose 3.3 cents at the pump last week, for an average of $1.244 a gallon, according to the widely-watched Lundberg survey.

OPEC members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

OPEC measures the price by calculating the average values of a "basket" of several types of oil that vary in price according to sulfur content and gravity.

The OPEC basket is made up of Algeria's Saharan Blend, Indonesia's Minas, Nigeria's Bonny Light, Saudi Arabia's Arabian Light, Dubai of the United Arab Emirates, Venezuela's Tia Juana and Mexico's Isthmus crude.

OPEC set the target price of $21 a barrel in July 1990, raising it from the old target of $19 that had been in place since 1986.

Prices soared to about $40 a barrel after the invasion of Kuwait set off a world petroleum crisis, but after they eased in 1991, OPEC has perennially fallen far short of its pricing goals.