OPEC keeps markets guessing on production cut

Published March 15th, 2001 - 02:00 GMT

OPEC is set to cut output by up to one million barrels per day (bpd) to prop up prices amid a slowing of global demand, ministers said on Thursday. 

 

Uncertainty however remained about the final figure to be decided at an OPEC meeting on Friday, which could be as high as 1.5 million bpd, according to the grouping's chief. 

 

Crude prices slipped amid the doubts, falling to $24.45 per barrel in London, the lowest level this year, following a heavy sell-off touched off by fears that supply will soon start to outstrip demand. 

 

In Vienna, Venezuelan Oil Minister Alvaro Silva said the widely-expected cut, to be agreed at a formal meeting on Friday, would be between 750,000 and one million bpd. 

 

"A consensus is forming around these figures," he told reporters in Vienna as ministers arrived in Vienna for the meeting of the Organization of Petroleum Exporting Countries (OPEC).  

 

Analysts had forecast that the 11-member group would agree a cut of between 0.5-1 million bpd to head off a feared slump in prices, as world demand for oil eases into the northern hemisphere's summer. 

 

OPEC President Chakib Khelil said earlier on Thursday that the cut could be as big as 1.5 million bpd. As president, Khelil is charged with taking into account the views of all OPEC members.  

 

Iraq's Oil Minister Amer Rachid said as he arrived here that he wanted a cut of "at least" one million bpd, while Kuwaiti Minister Adel al-Sabeih said the consensus was "perhaps" more on one million bpd. 

 

"All options are open," United Arab Emirates (UAE) Oil Minister Obeid bin Saif al-Nassiri meanwhile told reporters. 

 

The 11-member grouping already cut production by 1.5 million bpd in January to shore up slumping prices, which have settled around the OPEC target of $25 a barrel in recent weeks. 

 

OPEC is concerned about the risk of further a price slump as the northern hemisphere warms up, decreasing demand. OPEC Secretary General Ali Rodriguez kept reporters guessing.  

 

"We have to take preventive measures to maintain the (price) stability, but we have to wait for the results of the meeting," "There are many factors, like the slowdown in the American economy, in Japan and the impact of the situation in Asia mainly in Korea and Taiwan and other countries," he added. 

 

Saudi Arabian Oil Minister Ali al-Nuaimi, whose country is by far the biggest OPEC producer, declined to forecast the size of the cut, but warned that the meeting could last into an extra day. 

 

"It could be a two-day meeting," he told reporters during his traditional morning jog. The meeting is scheduled to begin late on Friday, after the traditional informal talks among ministers in their hotels. 

 

Analysts agree that OPEC, which has seen prices roller coaster over the last few years, from 10 dollars in 1998 to over $35 last year, is nervous about a new price slump.  

 

Meanwhile oil-importing nations, already facing an economic slowdown, are concerned they will be forced to tighten their belts while OPEC members try to shore up prices to maintain their revenues. 

 

At the London-based Centre for Global Energy Studies, Leo Drollas suggested that a cut was not necessary to maintain prices at around current levels, warning it would push prices higher. 

 

"It is going to aggravate the stock position and send prices higher than they otherwise would have been and thereby affect economic growth and prevent a more rapid recovery."—AFP. 

©--Agence France Presse 2001. 

 

 

© 2001 Mena Report (www.menareport.com)

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