Opec to delay production decision to next month

Opec members, who agree oil supply is exceeding demand, will delay a decision on whether to cut production again until next month, giving them time to assess the previous attempts to halt a plunge in the prices.

Today’s meeting in Cairo will prepare the ground for the December 17 summit in Oran, Algeria, according to Ali al-Naimi, oil minister of Saudi Arabia, the world’s largest exporter and de-facto Opec leader. “We will decide on a firm measure when we meet in Oran.” Asked if the producer group would seek to lower output then, he replied, “A cut is possible, we will have to see.”

Crude oil prices have slumped 62 per cent from July’s record of $147.27 a barrel as the global recession cuts fuel demand. Prices continued to slide even after the Organization of Petroleum Exporting Countries (Opec), the producer of more than 40 per cent of the world’s oil, decided to reduce production quotas by 1.5 million barrels a day on October 24.

Saudi Arabia sees $75 a barrel as a fair price for oil, King Abdullah was cited as saying by today’s Al-Seyassah, a Kuwait-based newspaper. Oil prices at this level would allow investment, al-Naimi later told reporters in Cairo. Oil industry inventories should ideally be equal to about 52 days worth of demand, he said. Stockpiles exceeded that level in the third quarter, reaching about 55 days of forward demand.

Opec President Chakib Khelil said some oil needs to be removed from the market because members can’t find buyers for all of their oil. “Some countries are unable to sell their crude,” he told reporters in Cairo. “They can find no buyer. Crude should be taken off the market. The market is oversupplied.”

Iraq seeks a “fair oil price” and the Saudi assessment of $75 a barrel will be discussed at today’s meeting, Oil Minister Al-Shahristani said. “Everybody is in agreement that the production is too much and the prices are too low,” he said. Iraq isn’t bound by Opec quotas.

Opec had called a “consultative” meeting of ministers for today rather than wait until its next scheduled December conference in Algeria, as the slowing world economy reduced global consumption faster than expected. In September, the group urged greater compliance with existing output limits.

The Cairo meeting, originally intended just for ministers from Arab nations, was expanded into a full Opec meeting, including countries like Venezuela, Iran and Angola. The 11 Opec states subject to output quotas will produce 27.8 million barrels a day in November, according to Geneva-based consultant PetroLogistics, in excess of their official limit of 27.3 million barrels a day.

Eleven years ago, Opec members bickered over quotas as oil prices slid 28 per cent in 10 months amid the onset of the Asian financial crisis. At a meeting in Jakarta in November 1997, they raised quotas, even as economic turmoil in Asia was slowing demand and the prices fell another 44 per cent by December 1998 to a low of $10.35 in New York.