OPEC must act to confront the threat of a fall in oil prices next year, Algerian energy and mines minister Chakib Khelil said Saturday on the eve of a one-day meeting in Vienna.
"We must do something but we have to see how we can make this adjustment and when to take a decision," Khelil said in an interview with AFP.
He confirmed "OPEC's concern over the risk of a collapse in prices" at the start of next year due to over-production.
"If we take the average of OPEC supply required for next year, we are already one million barrels a day over" demand, the Algerian minister said shortly after his arrival.
"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," said Khelil.
He said he expected a new meeting of the 11-nation Organisation of Petroleum Exporting Countries (OPEC) in January to study market developments, the situation in the Middle East and the impact of winter on demand.
Taking into account expected developments in demand next year, "and if we carry on with the current level of production, we expect similar concerns to those of 1998 for the second, third and fourth quarters of 2001," Khelil said.
Crude oil prices collapsed after OPEC decided in November 1997 in Jakarta to open up the taps, without taking into account the Asian financial crisis which led to a sharp drop in demand.
The price of a barrel of crude dropped to less than 10 dollars a barrel in 1998, seriously hurting many producers.
The Algerian minister called for reforms to the loosely-applied OPEC oil price mechanism, which boosts production if prices remain above 28 dollars a barrel for more than 20 days and cuts output if they are below 22 dollars for more than 10 days. "The mechanism is useful but could be improved," Khelil said.
"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," he added.
"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.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)