OPEC may have to cut output if the slump in oil prices continues, but it should not rush into any move that will destabilize the market, Saudi Oil Minister Ali Al-Nuaimi has said. In an interview with the Middle East Economic Survey, MEES, obtained by AFP Saturday, September 29, Nuaimi said the oil cartel might have to curb output beyond the 500,000 barrels per day provided for in its so-called price band mechanism.
On the other hand, the Organization of Petroleum Exporting Countries may not need to do anything before its next meeting on November 14, Nuaimi told the authoritative Nicosia-based newsletter a day after OPEC ministers wound up a meeting in Vienna.
The OPEC ministers decided to keep output level unchanged at 23.2 million barrels per day (bpd), but said they could cut production in early October if prices, which have tumbled more than 20 percent since the September 11 terror attacks in the US, remain weak.
OPEC will apply its price mechanism, which provides for an automatic cut in output of 500,000 bpd if prices persist below $22 a barrel for a 10-day period, OPEC President Chakib Khelil said Thursday.
"We may activate the mechanism, but we may need to do more than is provided for in the mechanism," Nuaimi told MEES."In other words, it would probably be more like a discussion over the phone among the oil ministers concerned — like what we did in July — if we have to before 14 November," he said.
Nuaimi said it was not true that OPEC "micromanages the market." "What we do is set a price band, and within that band we made a preference of $25 a barrel," he said. "The second thing is we set a direction for that price. When it is $28 or higher, our direction is to add more supply. When it is at $22 a barrel or lower, our direction is to withdraw supply."
But the Saudi oil chief, whose country is the world's largest oil exporter, said OPEC should avoid any move that would contribute to destabilizing the market. "With the economic situation today, it is wise to watch the market a little bit and not contribute to destabilizing it," Nuaimi said.
"We just implemented the one million bpd cut in production in September," he said. "That hasn't even been felt in the market yet. This is another reason why we need to wait and see the impact of that action — again to avoid destabilizing the market. "I'm not really sure we need to do anything before our 14 November meeting."
Nuaimi said OPEC member states had made a "very firm commitment" to adhere to their output quotas. Non-OPEC oil producers were "no less" committed to cooperate to protect crude prices, Nuaimi said.
"They are, however, concerned because of their creditors, who of course have an influence on what they can and cannot do," he said. "Their cooperation with us is good," Nuaimi said, citing Mexico, Norway, Oman and "even Russia, to some degree." "(But) what we have to recognize is that each one of those countries has another relationship that impacts the publicity of their positions," he added.
The price of Brent North Sea crude for November delivery dived as low as $20.70 a barrel Friday, levels not seen for almost two years. By Friday afternoon, Brent had stabilized somewhat at $23.03 from $25.90 a week earlier.
In New York, October-dated light sweet crude futures dropped to $23.20 from $26.73 the previous Friday. The OPEC basket price stood at $20.68 on Thursday — below $22 for the fourth successive day. ― (AFP, Nicosia)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
