Opec wants a fair price
November 29, 2008
Cairo - Opec began meeting on Saturday to discuss how to shore up tumbling oil prices amid a looming global recession, but ministers said any move to cut output would only be made next month.
Ali al-Nuaimi, oil minister of cartel kingpin Saudi Arabia, said ahead of the consultative meeting in Cairo that a decision on production levels would be made at a scheduled gathering in Oran, Algeria on December 17.
"This (Cairo) meeting is a preparatory meeting for a more resolved and firm decision in Algeria," he said.
Saudi Arabia's King Abdullah said in an interview published in a Kuwaiti newspaper that an oil price of $75 would be fair - an indication that cuts might be forthcoming to lift the flagging market.
"We think that a fair price of oil is 75 dollars a barrel," he said. "Our budgets were not set at the latest world prices, but at another, lower price."
Slumping demand for crude in the face of a global economic downturn has sent prices crashing by about two thirds from record highs above $147 a barrel struck just four months ago.
Saudi Arabia is the world's top crude exporter and by far the most important player in the powerful Organisation of Petroleum Exporting Countries, which pumps 40 percent of global crude supplies.
Other Opec members, including Iran, Kuwait, Qatar and Nigeria, have also expressed support for deferring a decision until December.
"The (Cairo) meeting will discuss the drop in oil prices, the impact of the global economic crisis on the oil market, the size of the surplus on the market, and how Opec will deal with stock builds," Kuwait Oil Minister Mohammad al-Olaim said.
"There will be a decision regarding supplies but it is more likely that this decision will be taken in Algeria," he said.
"This meeting is a consultative meeting. It will discuss the previous output cut decision and its impact on the oil markets."
Opec Secretary General Abdalla Salem El-Badri, who on Friday described the market as over-supplied, also said a decision would be made in Oran.
Oil prices, which closed Friday at about $54 per barrel, have slumped by about 63 percent since setting record highs above $147 on July 11.
Last week the market dived below $50 to their lowest levels since early 2005 as concern mounted about the impact of a growing global recession.
Qatari Energy Minister Abdullah al-Attiyah said current prices, which have slashed oil revenues for Opec members, were too low to sustain investments in the oil industry to meet a future rise in demand.
"We can all live with 70 dollars," Attiyah said. "With this price, we can invest in upstream projects but below that it will be very difficult" to boost output capacity.
"Projects could be postponed and maybe we will see a shortage in production" when demand picks up, he added.
Iraqi Oil Minister Hussein al-Shahristani had said Friday that $80 a barrel was "reasonable" and that his country would support any Opec decision to cut output.
Libyan Oil Minister Shukri Ghanem has said that while Saturday's meeting was meant to be consultative, a decision to cut output should not be ruled out.
In Vienna last month, Opec ministers agreed to reduce production by 1.5 million barrels per day (bdp) -- but the market carried on sinking and the Cairo meeting was hurriedly called as prices plunged below $50.
Opec's official output quota currently stands at 27.3 million bpd, excluding Iraq.
Analysts warn that Opec could be forced to act now to prevent prices sliding even further.
"The more the speculation had gone on, the more Opec may be painted into a corner," said Simon Wardell, oil analyst at the IHS Global Insight consultancy in London.
"If they don't announce a cut now, they run the risk of a possible price fall next week.
"I think they will announce something this weekend - even if just a deferred cut to be approved in Algeria." - AFP
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