Iran OPEC Gov: OPEC May Need 1M B/D Output Cut In Q1 '01
Dow Jones Newswires
TEHRAN -- Iran's governor to the Organization of Petroleum Exporting countries, Hossein Kazempour Ardebili, said Tuesday that, assuming Iraqi oil is back in the market by January, his feeling is that OPEC may have to cut production by about 1 million barrels a day in the first quarter of next year, to avoid a price crash.
Speaking to reporters, Ardebili said that a further 1 million b/d cut may also be necessary during the second quarter of next year, assuming Iraqi oil is flowing without disruption.
He added, however, that no decision has been made by OPEC on what volumes may be cut next year, if any, and that this will be decided after an assessment of market fundamentals.
OPEC next meets Jan. 17 in Vienna. Ardebili said the group will have two decisions to make at the meeting. One will be to consider an output cut and the other, to decide on whether to call another extraordinary meeting in late February or early March.
Ardebili said that in the first quarter, he expects global oil supply will exceed demand by about 2.4 million b/d and in the second quarter, by 3.5 million b/d, assuming OPEC and Iraq continue to produce at current rates.
Ardebili said had Iraqi oil exports not been halted last week, the market would have begun to witness a drop in prices at the beginning of December.
"Of course, the exit of 2.4 million b/d a day of oil from Iraq has delayed this situation (price drop), and as long as it continues, we won't see prices collapse," he said.
He added that if Iraq continues to withhold its oil from the market, prices will rise in January.
Last week, Iraq's State Oil Marketing Organization informed crude buyers they couldn't load December crude as of midnight Nov. 30 without paying an extra charge of 50 cents a barrel to an account outside U.N. control.
But the halt in exports by Iraq early Friday after the U.N. Sanctions Committee rejected Baghdad's proposed prices for December exports as below market value, didn't have the expected effect on prices. Rather, prices fell sharply Friday as traders feared that releasing crude from strategic reserves or increasing production to address the Iraq-U.N. dispute could bring an oversupply of oil.
Monday, the value of the OPEC basket of seven crude oils averaged $28.28 a barrel, compared with $29.30/bbl Friday and $30.39/bbl Thursday.
OPEC ministers said over the weekend that the group wouldn't rush to fill the gap in Iraqi oil exports, but wait and see what happens to market fundamentals and then act if necessary.
U.N. diplomats Monday said Iraqi officials were likely to call on U.N. overseers Tuesday in the hopes of reaching an agreement.
Saeed Hasan, Iraq's envoy to the U.N., said Monday Iraq hadn't demanded the additional payment outside U.N. control and that it hoped discussions between SOMO officials and the overseers would produce a compromise agreement. He added that the two sides were only 5 cents to 20 cents apart on prices.
Iraq, under U.N. sanctions since its 1990 invasion of Kuwait, exports on average 2.3 million barrels a day of oil through the U.N. oil-for-food program to purchase food, medicine and other humanitarian goods for its civilians.
Ardebili said the current OPEC basket reference price used by the group isn't transparent enough and needs to be adjusted.
Set in 1986, the basket is based on the average prices of Algerian Saharan Blend, Indonesian Minas, Nigerian Bonny Light, Saudi Arabian Arab Light, Dubai Fateh, Venezuelan Tia Juana Light and Mexican Isthmus.
"Technically speaking, the present reference basket is both sweater and lighter than the member states' actual production. The components within the basket have to be made heavier and more sour. Considering that consumers should be more precisely informed about our price policy, it would be better for us to reexamine the basket and make it more representative of the real situation," he said.
He said OPEC has been discussing the idea of establishing a new basket for the past 18 months and that the delay in a firm decision on the matter has been due to the group's preoccupation with more immediate issues.
Ardebili said Iran had first suggested the idea of a new basket although more recently, it had been promoted by Venezuelan Oil Minister Ali Rodriguez |
