Only two days after Saudi Oil Minister Ali Naimi had cautioned that Riyadh would support a production cut at OPEC’s next meeting on January 17th, a Saudi oil official was quoted on January 2nd as saying that the kingdom believed a cut of 1.5 million b/d would be necessary to restore market balance.
The official said that: “According to the data available that is what is needed to balance supply and demand.”
The Saudi statements follow a two-day summit in Bahrain of the Gulf Cooperation Council (GCC) leaders, during which the group, comprised of Gulf OPEC members Saudi Arabia, Kuwait, Qatar and the UAE and non-OPEC members Bahrain and Oman, called on oil ministers to reduce production to restore market stability and to keep prices within the desired range of $22-$28 a barrel.
OPEC’s Vienna secretariat on January 2nd confirmed that prices for the group’s basket of seven crudes had remained below $22 a barrel for seven working days, prompting speculation that the price band mechanism could be triggered by January 5th.
A Kuwaiti oil source said on January 2nd that OPEC should cut production by between 1.5 and 2 million b/d when the group meets in two weeks.
The source indicated that if the cartel’s price band mechanism is not triggered before the meeting, the cutback should total 2 million b/d, while if the mechanism is triggered, the group should reduce production by 1-1.5 million b/d.
The source also hoped that non-OPEC producers would follow suit, backing OPEC’s efforts to prevent further price slides. Iran, Venezuela, Libya, Algeria and Venezuela have also voiced support in recent weeks for large supply cuts.
The International Energy Agency (IEA), which monitors contingency stocks for its member countries, meanwhile said that talk of supply cuts increases oil price volatility.
IEA Deputy Director Bill Ramsay said that: “We’re still in an understocked situation in the global market and that creates a very volatile base for these sorts of announcements.” (oilnavigator)
© 2001 Mena Report (www.menareport.com)
