Home / World Business
Mon, Dec 11, 2006 - Page 10 News List

OPEC favors output cut: experts

OIL CARTEL Given a mild winter in the US and Europe, higher inventory levels and a US economic slowdown, oil ministers may be inclined to vote in favor of a quota cut


Ministers from the 11-member OPEC are likely to decide on a further cut in OPEC oil output when they gather on Thursday in Abuja, Nigeria, analysts say.

The cartel, which regulates its oil supply to maximize export revenues and control prices, is eager to keep crude around US$60 per barrel and a further cut would support the market heading into the northern hemisphere winter.

The meeting is also expected to include some behind-the-scenes friction as countries reconvene to assess adherence to their individual production limits.

OPEC lowered its output quota at its last meeting in Qatar to stem a slide in prices, which had fallen from a high of US$78 per barrel in July to about US$58 at the time of the meeting in October.

The 1.2-million-barrel-per-day (bpd) cut was distributed among the 10 members bound by quota system, but there are suspicions of cheating amid evidence that some members have continued pumping at previous levels.

"We estimate the actual cuts out of the 1.2 million-barrel announcement at something about 80 percent, or 800,000 barrels a day," said Carl Calabro, a senior analyst at Washington-based energy consultancy PFC Energy.

"I'm sure there will be some finger-pointing at first. There were 400,000 that were supposed to be cut, so where've they gone?" he said.

Saudi Arabia has most strictly adhered to its limits, he said, with the over-production suspects being chiefly Iran and Venezuela.

"There are some people that talk a good game, who talk about cutting production, but don't," he said.

A lack of discipline among OPEC members has bedeviled the cartel in the past and the reduction in Qatar was greeted with skepticism by some analysts, who suggested some members would find it too difficult to forgo oil revenues.

For the meeting in Abuja, prices are back above the US$60 mark at US$62.03 per barrel, but mild winter weather in the US and Europe, inventory levels and a slowdown in the US economy are likely to convince members of the case for another cut.

Ministers from the leading oil exporters have all given notice in recent weeks that the group is prepared to pare back its quota, which binds all members except Iraq and currently stands at 26.3 million bpd.

Asked at the beginning of this month whether the OPEC cut would be 500,000 bpd, Nigerian Oil Minister and OPEC President Edmund Daukoru told journalists: "When we meet, we will look at the data and the trend and I do not expect anything less at this meeting."

Saudi Arabian Oil Minister Ali al-Nuaimi, who is considered the most influential member owing to the country's vast resources, has also hinted that OPEC will cut again.

"They will probably lower their production ceiling because they have mentioned this for some time ... especially the Saudi minister which is the kingpin of the OPEC meeting machine," said Manou-chehr Takin, a senior oil analyst at the Center for Global Energy Studies.

Indonesian Energy Minister Purnomo Yusgiantoro said on Friday that OPEC was likely to cut by 1 million to 1.5 million bpd. Representatives from Algeria, Iran, Qatar and Venezuela have all previously expressed support for more action.

Veronica Smart, an analyst at the Energy Information Center, a British consultancy, said a reduction would be designed to defend the US$60 price ceiling.

"It's not their official position, but US$60 a barrel has been mentioned as a ceiling. They took a cut when prices were below US$60 [in Qatar] so that reinforces the view," she said.

This story has been viewed 2306 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top