ABUJA, 4 October 2006 — OPEC President Edmund Daukoru yesterday called on other members of the oil exporting group to join Nigeria in reducing supply to world markets. Daukoru, who is also Nigeria’s top oil official, told Reuters that the latest fall in oil prices below $60 a barrel vindicated Nigeria’s decision to cut output from Oct 1.
But not all members of the 11-member group viewed the market in the same way, he added. “We believe that the market is slightly oversupplied. Nigeria wants to show a good example. We are simply doing what we think is right in light of the market,” he said by telephone.
He was referring to Nigeria’s unusual move last week of announcing a unilateral reduction in oil exports. This was followed by a similar move by Venezuela. OPEC nations rarely take such individual steps, preferring to act in concert.
Nagging at the organization is the knowledge that US heating oil stocks are at their highest in seven years, that the group has been oversupplying the market for most of the past year and demand for OPEC’s oil is expected to fall sharply.
All that could be setting the stage for a price collapse - and a collective output cut when OPEC next meets on Dec. 14. Some believe it could come even sooner. “It’s very early to say OPEC is in disarray,” said London-based oil analyst Geoff Pyne. “But at some stage there will have to be a decision on whether a serious surplus of oil is building. And that could be quite soon.”
Asked whether OPEC was planning to hold an emergency meeting of ministers before its next scheduled meeting, Daukoru said: “We would rather watch what the members do. We don’t all of us read the market in the same way.” He added: “(Today’s drop in the oil price) vindicates what Nigeria is doing and I hope other members will act in the same way.”
World oil prices sank under $59 yesterday, hitting the lowest points for seven and a half months as traders focused on healthy US stocks and a potential end to the Iranian nuclear crisis. Crude futures, which lost about $2 on Monday, shed 3.0 percent in value yesterday to strike their lowest levels since Feb. 16.
New York’s main contract, light sweet crude for delivery in November, tumbled $2.19 to $58.84 per barrel in pit trading. That was 25 percent lower than an all-time peak of $78.40 in July. The contract later pushed back up to $59.25. Brent North Sea crude for November delivery plunged $2.08 to $58.37 per barrel in electronic deals yesterday. The contract later traded at $58.80. Brent crude has now fallen by almost 26 percent since its record high of $78.64 reached in August.
World oil markets were also absorbing news from Royal Dutch Shell that nine of the 25 oil contractors who went missing in Nigeria, following an attack by heavily-armed assailants, have been freed.
Twenty-five people working as contractors for Shell went missing following the attack in which 14 Nigerian soldiers were killed, local newspapers reported yesterday.
Traders are now looking ahead to today’s weekly snapshot of US energy stockpiles from the Department of Energy.