OPEC urged to make big cuts to oil output
(Adds Kuwait comments)
By William Hardy
VIENNA, June 22 (Reuters) - OPEC oil producers alarmed by
a revenue collapse were urged on Monday to administer shock therapy to sickly prices by agreeing larger expected production cuts at a gathering this week.
Cartel member states assembling for a summer conference hope a planned second round of supply restraint in the space of three months will puncture swollen supply and raise prices from 10-year lows.
But Gulf Arab member Kuwait called on the 11-country producer club that supplies 40 percent of global output to surprise markets by agreeing bigger than proposed sacrifices.
''A shock is what the market might need, because the situation is very bad,'' Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah said before leaving for Vienna.
''The cuts announced so far did not have the impact that we had expected. That is why we should reconsider the amount already pledged.''
At previous OPEC meetings, analysts have said similar prior calls for extra restraint could rebound on the group by raising market expectations that producers would struggle to fulfil.
If the market is not satisfied with any eventual extra reductions, the price could slump yet again, they say.
The Kuwaitis are part of a trio of OPEC's core Gulf Arab elite including Saudi Arabia and the United Arab Emirates due to arrive on Monday evening to map out a common strategy.
Some OPEC-watchers saw summer storm clouds gathering over the Austrian capital as harbingers of recriminations within the cartel over the wreckage of earlier output cuts.
The gathering of the Organisation of the Petroleum Exporting Countries seeks to approve a fresh package of output cuts after a first round of reductions in March proved too small to drain bulging world crude stocks.
On the table in Vienna will be cuts of about 800,000 barrels a day, some three percent of the cartel's output, on top of the 1.245 million OPEC promised to chop in March.
Analysts say that may not be enough to turn the tide in OPEC's favour given slowing global oil demand growth.
Benchmark Brent crude now is worth $13 a barrel, six dollars below last year's price and in real terms no higher than it was 25 years ago.
Oil export revenues are running a third lower than last year, putting unbearable pressure on oil-dependent national budgets already sliced to the bone.
Already there is scepticism that OPEC may lack the political will to give up enough of its 40 percent share of world output to sustain a higher oil price in the long run.
''OPEC is still trapped between the fear of total price collapse and fear of losing market share,'' said Washington consultancy Petroleum Finance. ''Given this dilemma, short term fixes are all they can muster.''
Apart from Kuwait, Iran and Algeria are also believed to be among those likely to push for larger reductions, but Saudi Arabia's lead is vital.
Saudi Arabia's critics say the cartel's largest producer must take some blame for the wreckage of an oil market which in 1996 and 1997 provided exporters with windfall revenues.
''The people who should show leadership now are the Saudis,'' said a senior Kuwaiti official. ''They engineered Jakarta and there are real problems as a result of that.''
The kingdom late last year decided to take the risk of commandeering some extra market share and at November OPEC talks in Jakarta pushed reluctant fellow members to raise oil output by 10 percent.
The meeting blithely ignored early signs of the downturn in Asia's economic fortunes.
The region which accounts for more than a quarter of global oil consumption is now expected to see demand stagnate, or even contract, for the first time in decades.
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