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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (57148)	12/12/2004 3:35:11 AM
From: elmatador	Respond to of 74559

OPEC for the first time abandons the tactic of pricing not allow alternatives. Picture that, less demand, price pressure down. Production cuts, price up, less demand and so it goes... This is good for alternatives. OPEC May Consider Further Production Cuts 12.11.2004, 06:06 PM OPEC might make deeper cuts in production if prices continue to slide, Gulf oil ministers said Saturday, a day after crude prices tumbled to their lowest levels in five months when producers decided to limit supply by 1 million barrels a day. Crude futures fell by nearly $2 a barrel to a five-month low below $41 Friday shortly after the Organization of Petroleum Exporting Countries said it would cut daily output starting Jan. 1. Traders viewed the cutback as too conservative to stem sliding prices. Kuwaiti Oil Minister Sheik Ahmed Fahd Al Ahmed Al Sabah said OPEC was prepared to act further if prices do not stabilize. "I think something between 500,000 to 1 million barrels a day" more oil may need to be withdrawn "if prices continue to drop," Al Sabah told reporters. Qatar Oil Minister Abdullah bin Hamad Al Attiyah also held out the possibility of further OPEC cuts. "If we need it we will do it," he said. Libya's Oil Minister Fathi bin Shatwan added: "If the market behaves well, then that's good. If not, then we'll have another cut." The ministers spoke Saturday ahead of a meeting of the Organization of Arab Petroleum Exporting Countries, which includes Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria and United Arab Emirates. They reacted to the sharp drop in prices Friday with a mix of concern and calm. "We are very concerned, but we believe this is a correction," Qatar's Al Attiyah said. Al Sabah said he expected prices to stabilize once the markets absorbed the OPEC news. "Yesterday was a normal reaction," he said. "Monday, when members start to cut their production, I think the markets will be more stable." Friday's move represented a decision by OPEC to take a middle road. On the one hand, the producers want to prevent further revenue losses after a recent decline in prices. But they also want to reduce the type of volatility in the market that sent prices soaring to record highs earlier this year and forced producers to scramble to meet demand. OPEC's two other options - doing nothing and risking continued losses, or reducing the quota target and precipitating a new oil crisis - were clearly not appealing to members. Saudi Arabia Oil Minister Ali Naimi confirmed his country will cut production by 500,000 barrels a day. Saudi Arabia is responsible for most of the overproduction. If effective, the reduction would scale back output to the group's overall ceiling of 27 million barrels a day. In recent months, OPEC's members had been pumping more than 30 million barrels a day with Iraq included. Iraq has been exempted from quotas to enable it to rebuild its economy. But an international energy monitoring organization said Friday that because of violence and other problems, Iraq's production fell sharply last month, dragging down total OPEC output. OPEC plans to meet Jan. 30 in Vienna to assess market conditions and set output policy. That decision to meet again was a signal that producers are ready to defend current prices. The OPEC meeting came amid members' concern about a possible oil glut in the second quarter of 2005. Prices are now 25 percent below their peaks of more than $55 a barrel in October. At the close of trading Friday, benchmark light, sweet crude oil futures for January were down $1.82 to $40.71 barrel on the New York Mercantile Exchange. In London, Brent crude oil for January settled at $37.38 a barrel, down $2.29 on the International Petroleum Exchange.