EGYPT: OPEC considers production cuts, delays decision
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
Ministers from OPEC countries decided in Cairo on Saturday to delay until December a decision on cutting production to stem the fall of crude oil prices that have tumbled by more than 60% in recent months.
The meeting came as the global financial crisis and plummeting demand continued to suppress oil prices, which have dropped from nearly $150 a barrel in July to about $54 today. King Abdullah of Saudi Arabia, the leading producer in the Organization of the Petroleum Exporting Countries, was quoted by a Kuwaiti newspaper as saying that $75 a barrel was a ‘fair price.’
But the decision to take measures to nudge prices up was postponed until an upcoming meeting in Algeria. OPEC President Chakib Khelil said the organization ‘agreed to take any additional action on the 17th of December to balance oil supply and demand and achieve market stability.’
The concern among members of the energy cartel, which decreased production in October by 1.5 million barrels a day, illustrates the shifting fortunes and precipitous downturns jolting the beleaguered world economy. OPEC enjoyed record prices just a few months ago, only to have them evaporate as international markets spiraled downward, energy demand shrunk and leading economies, including the U.S. and members of the European Union, neared or officially entered recession.
The Saudis want to see prices rise by at least $20 a barrel. Saudi Oil Minister Ali Ibrahim Naimi told reporters that OPEC would ‘do what needs to be done’ to bolster prices.
He added: ‘There is a good logic for $75 a barrel. You know why? Because I believe $75 is the price for the marginal producer. If the world needs supply from all sources, we need to protect the price for them. I think $75 is a fair price.’
Qatar’s oil minister, Abdullah bin Hamad Attiyah, told the Arab TV news channel Al Arabiya that sinking revenues would damage the oil industry’s future, saying that if prices linger below $70 a barrel ‘investment would freeze, which would lead to a crisis in supply in the future.’
The organization’s less-stable economic members, particularly Nigeria, Venezuela and Iran, are worried that months of low prices will hurt their national budgets. There is also apprehension that some members may not comply with production quotas and will produce above the cuts. But decreasing world demand is likely to squeeze the cartel well into 2009.
OPEC President Khelil told reporters before the Cairo meeting that ‘some countries are unable to sell their crude. They can find no buyer. Crude should be taken off the market.’
-- Jeffrey Fleishman in Cairo
