PARIS, 23 November 2005 — Consumers are breathing easier as oil prices recede, but OPEC is already thinking about whether to cut production in the first half of next year if demand falls off sharply. A barrel of oil quoted in New York currently costs about 19 percent less than the record high of $70.85 reached on Aug, 30.
Prices now run close to $57, and companies in sectors such as transport are beginning to progressively pass on the lower cost. But consumers who were stung by the last spike are far from satisfied and the current price is “not yet at an acceptable level,” French Finance Minister Thierry Breton said Monday. He was, however, “optimistic for better control of prices in 2006.”
But members of the Organization of Petroleum Exporting Countries follow the markets closely, and are wary that prices might collapse as they did following the 1998 Asian financial crisis when demand dropped off sharply.
Ahead of their next scheduled meeting on Dec. 12 in Kuwait, OPEC members have sought to reassure consumer countries, but continue to look to the second quarter of 2006. Analysts expect OPEC to maintain its official production quota at 28 million barrels per day when they meet, along with an option to pump an additional two million bpd if demand required it.
“There is no need to cut (output) unless the prices reach a very bad situation,” OPEC President Ahmad Fahd Al-Sabah of Kuwait said Saturday on the sidelines of the opening of the International Energy Forum permanent seat in Riyadh.
Qatari Energy Minister Abdullah bin Hamad Al-Attiyah said the oil organization would have to keep an eye on demand and be ready to respond. “There will be more oil floating and this might be a concern. We have to deal with it very carefully,” he said. “Now so far, if we keep the price as it is, it will be okay.”
In London, the Center for Global Energy Studies noted Monday that OPEC was likely to reduce output next year to prevent oil prices from dropping. “Unless oil demand growth rebounds strongly in 2006, OPEC will face the need to make output cuts in order to defend prices,” the CGES said in an influential monthly report. “The size and timing of the output cut will depend on the strength of underlying demand growth and the severity of the Northern Hemisphere winter, as well as the price level that the Organization chooses to defend.”
Meanwhile, an international oil expert said yesterday he expected world oil prices to hover around $64 per barrel up until 2010 because of high demand and a shortage in supply.
“Looking at oil projects coming on stream in the Middle East and Asia and comparing this against demand prospects, we think world oil prices may still stay high at least up to 2010,” said Fatih Birol, head of the Economic Analysis Division at the Paris-based International Energy Agency (IEA) told Emirates News Agency.
Oil prices rose strongly yesterday as falling temperatures across the United States and Europe prompted traders to predict a sharp rise in demand for heating fuel during the northern hemisphere winter.
New York’s main contract, light sweet crude for delivery in January, jumped 90 cents to $58.60 per barrel in pit deals. In London, the price of Brent North Sea crude for January delivery rose 89 cents to $56.22 per barrel in electronic trading.