OPEC members call for output cuts
Iran, Kuwait and Libya called on fellow OPEC members on December 18th to reduce production at the group’s next formal gathering in order to correct the current supply imbalance.
Iran’s OPEC Governor Hossein Kazempour Ardebili said that: “OPEC will need to make a minimum cut of 1 million b/d at the January meeting regardless of whether the basket price is below $22 a barrel.”
He added that: “The fundamentals - stock build up and supply/demand imbalance - warrant this cut.” Kazempour also indicated that if the group’s price band mechanism is triggered before the next meeting, OPEC will automatically slash output by 500,000 b/d, with additional cuts to be decided on January 17th.
Under the cartel’s price mechanism, if the price of OPEC’s basket of seven crudes dips below $22 a barrel for 10 consecutive working days, a production cut of 500,000 b/d will automatically be triggered.
Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah also said on December 18th that OPEC would move to curb production levels if prices continue to slide.
He said that: “Consultations are ongoing and statements made are clear: If prices continue to decline, cuts will be unavoidable.”
Libyan President Moammar Qaddhafi sent a letter to other OPEC heads of state on December 18th asking for cooperation in curtailing production in order to avoid a price collapse.
He wrote that: “The situation at this stage requires a serious look into cutting production to restore the market balance.” He added “Oil specialists and analysts are warning against an upcoming crisis of prices which will lead OPEC producers to a crisis similar to the one that they went through in 1998.”
Qaddhafi did not suggest a specific figure for the production cut, but blamed recent high prices on market speculation and heavy fuel taxes, saying that there is no shortage of oil in the market. - (oilnavigator)