OPEC grapples with fears of oil supply glut
OPEC ministers raised the prospect of a cut in crude oil production next year as they prepared for a meeting Sunday to discuss fears of an impending glut.
The 11-nation grouping, which has opened the taps four times this year to alleviate sky-high prices, is for the first time in a year talking about the possibility of cutting back.
The one-day meeting of the Organisation of Petroleum Exporting Countries in Vienna was not expected to make specific decisions about future crude oil production.
But OPEC ministers said they would discuss concerns that supplies are already racing ahead of next year's expected demand, threatening a price collapse.
Speaking ahead of the talks, they all but ruled out bowing to pressure from consumers for a further increase in production to bring prices down from their current levels of well over 30 dollars a barrel.
Asked whether he feared an oil price collapse, Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah said: "We have to be cautious about it, yes," adding that OPEC should cut crude production "if prices are low."
"It would be an option for any collapse in prices in the first quarter, second quarter of next year, yes," he said. Algerian Energy and Mines Minister Chakib Khelil told AFP that OPEC members were already supplying a million barrels a day in excess of expected demand for next year.
"It is better to take a decision in time; it is easier to cut production by one million barrels a day than by two million," Khelil said.
The Paris-based International Energy Agency (IEA) reported last week that at current OPEC production levels, supply would exceed demand by 1.3 million barrels a day by the first quarter of 2001.
Iranian Petroleum Minister Bijan Namdar Zangeneh and Indonesia's energy minister, Purnomo Yusgiantoro, agreed that the worries over overproduction would be hammered out Sunday.
But Saudi Arabian Petroleum Minister Ali Naimi, representing the world's biggest producer by far, declined to comment to reporters shortly after his arrival. The OPEC predictions are a far cry from the current state of a booming oil market. Prices have soared this year to 10-year high points amid fears that supply would not be able to match demand.
Consumers particularly in Europe have protested noisily about the knock-on effect on fuel prices, while oil importers have warned that the soaring prices could tilt leading economies into recession.
At a 21-member Asia-Pacific Economic Cooperation (APEC) forum meeting in Brunei, a report warned of harm to faltering economies such as South Korea from persistently high prices.
Leaders including US President Bill Clinton could call for a production increase this week, said one senior official, APEC economic committee chairman Mitsuru Taniuchi. But OPEC members appeared unmoved.
Instead, they called for reforms to a loosely-applied price band mechanism which could trigger a further 500,000 barrels a day OPEC production increase at the end of this month, if adhered to.
The mechanism triggers an output increase if prices remain over 28 dollars a barrel for 20 working days or a production cut if they persist below 22 dollars for 10 consecutive working days. Prices in London and New York remained well above $30 on Friday.
"I think the mechanism, which should not be a straitjacket, has shown its limitations because it only takes into account the price of the barrel and not the developments outside the market such as speculation or the political context," said Algeria's Khelil.
"The message is very clear: the mechanism should be reformed to take account of other parameters besides price, such as supply and demand and the state of stocks. The adjustment should be discussed at the conference but it is not certain that a decision will be taken," he added. But several ministers backed the mechanism in principle. –AFP.
©--Agenece France Presse.
© 2000 Mena Report (www.menareport.com)