Soon to be determined?...... OPEC seeks ways to avert slide in oil prices
Published on 12 December 2002
Arab News
SAUDI ARABIA'S FIRST ENGLISH LANGUAGE DAILY
arabnews.com
VIENNA, 12 December 2002 — Members of OPEC debated yesterday how to rein in overproduction and avert a slide in crude prices if demand slackens as expected next spring.
Delegates of the Organization of Petroleum Exporting Countries fear that some members might undermine the organization’s goal of keeping prices at around $25 a barrel.
Prices could tumble to below $20 a barrel without a cut in output, Saudi Arabian Minister of Petroleum and Mineral Resources Ali Al-Naimi told reporters as OPEC oil ministers gathered for talks in the Austrian capital.
“We are very worried,” said Obaid ibn Saif Al-Nasseri, oil minister for the United Arab Emirates, when he arrived at a hotel in Vienna.
The delegates were to meet formally today at OPEC headquarters in Vienna, Austria, to determine production for the coming months.
OPEC was also worried about a national strike in member state Venezuela, the world’s fifth-largest crude exporter. The strike has paralyzed oil shipments from the country.
January contracts of light, sweet US crude dropped 8 cents a barrel to $27.66 in early trading in New York, after jumping 55 cents Tuesday. Contracts of North Sea Brent crude for January delivery rose 3 cents a barrel to $26.45 in London.
OPEC, which produces about one-third of the world’s oil, has an output target of 21.7 million barrels a day.
Most OPEC members agree they need to raise the output ceiling, Naimi said Tuesday in London.
The increase should take effect Jan. 1, Naimi said, ahead of an expected decrease in demand for crude in the spring, when sales of heating oil decline with the warmer weather.
The Paris-based International Energy Agency argued there is no need for OPEC to cut output now. The agency is a watchdog for the Organization of Economic Cooperation and Development, a group that includes the world’s richest oil-importing nations.
“We’re heading into winter, prices are still strong and to tighten the market now would be premature,” said Klaus Rehaag, editor of the agency’s monthly oil market report.
In addition, the strike in Venezuela has caused oil production in that country to fall by 1.5 million barrels a day, Rehaag said.
The strike has compounded market uncertainty about the impact a US-led military attack on Iraq might have on Iraqi crude production.
Global production of crude rose by 185,000 barrels a day to 78.64 million barrels in November, the latest IEA report said yesterday. Even so, inventories were tight, and prices haven’t fallen dramatically, agency analyst Antoine Halff said.
Qatar Energy and Industry Minister Abdullah ibn Hamad Al-Attiyah said yesterday that OPEC must act against overproduction.
“We overproduce without a doubt,” Al Attiyah said, adding that “not to do something against it is not an option.”
Meanwhile, Kuwaiti Oil Minister Adel Khalid Al-Sabeeh said the 11 members of the OPEC hoped at a meeting in Vienna today “to find a solution with a good signal for the market.”
“We will see what’s exactly the need of the market and we will make a reasonable proposal for the market,” Al-Sabeeh said.
Algerian Oil Minister Chakib Khelil said there is “no consensus on anything”, adding “maybe tomorrow.” (Agencies)
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middle-east-online.com
2002-12-11
Al-Nuaimi warns of oil price drop
Saudi oil minister says kingdom to ask OPEC to cut output by 1.5-2.0 million barrels a day to avoid price drop.
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VIENNA - Saudi Arabian Oil Minister Ali al-Nuaimi called Wednesday on OPEC to cut its oil output by 1.5 to two million barrels per day (bpd) as the powerful cartel prepares to meet to find a way to deal with overproduction on the world market.
Al-Nuaimi was confirming in Vienna a statement he had made in Britain on Tuesday, ahead of a meeting in Vienna Thursday of the Organization of Petroleum Exporting Countries.
An OPEC source in Vienna said Saudi Arabia would propose an effective cut in oil production by increasing official quotas but lowering current output levels that now exceed such limits.
A oil official, who asked not to be named, said Saudi Arabia was also considering a drop in its production by 300,000-500,000 bpd.
Saudi Arabia is the world's largest oil producer with an output of more than seven million bpd.
"The oil price will fall under 20 dollars (a barrel), if current production levels are maintained," the official said.
The current OPEC basket price is 26.45 dollars for a barrel.
In 1998 crude prices dropped below 20 dollars, and in March 1999 benchmark Brent North Sea Crude fell below 10 dollars.
The oil market is awash with crude, with OPEC looking towards the first quarter of next year, a time when traders demand less oil as they are buying supplies for spring and summer in the northern hemisphere, when oil consumption is lower.
Against the backdrop of increasing tensions between the United States and Iraq, and a political crisis in Venezuela where a general strike has shut down oil production, the organisation is expected to consider how to better balance supply with demand on the oil market by reducing output.
OPEC does not need to boost production even in the event of a war in Iraq, Iran's Oil Minister Bijan Namdar-Zangeneh said Monday, arguing that quota-busting members meant that supply was already too high.
Iran is OPEC's second-largest exporter of crude.
The OPEC source said the proposal by Saudi Arabia would need the support of Algeria and Qatar when the 11-nation OPEC convenes.
OPEC decisions must be unanimous.
The current OPEC quota is 21.7 million barrels per day (bpd), with production shooting 2.5 to 3.0 million bpd past it, as members treat the limits as informal rather than iron-clad barriers.
Algeria and Nigeria have been calling, however, for production to be increased, and Qatar is believed also to be ready to increase output, although it has not said so officially.
United Arab Emirates Petroleum Minister Obaid bin Saif Al-Nasseri said in Vienna Wednesday that his country was "very much worried" by OPEC overproduction.
But he said about the Saudi proposal for production cuts: "There is no guarantee we will get full compliance."
The Middle East Economic Survey calculated in November that the oil cartel had produced 2.73 million barrels per day (bpd), or 12.6 percent, over quota agreements in October.
Production by the 10 member states, minus Iraq which is under a United Nations embargo, rose by 60,000 bpd last month to 24.43 million bpd, the industry newsletter said.
The only OPEC member in Latin America and a key crude supplier to the United States, Venezuela heads to the OPEC meeting with its oil industry shut down by a massive strike.
Faced with the worst-ever crisis of its oil sector, the government of President Hugo Chavez decided not to send Energy Minister Rafael Ramirez to the meeting.
Instead, Venezuela, the fifth-largest oil producer, will send a low-level delegation.
Oil analyst Leo Drollas said in London that the drop in Venezuelan production could make it difficult for OPEC to cut the cartel's overall production.
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