VIENNA: Iran led calls yesterday for OPEC to cut output ahead of a meeting of the oil producer group, with analysts expecting the organization to begin scaling back production to help support prices.
Oil prices have plummeted from record highs above $147 in July to about $107, with an OPEC meeting on Tuesday seen as a test of what price level the cartel wants to defend and of its power to influence the market.
Most analysts surveyed by AFP expect the 13-nation group to agree to trim its output informally before waiting until later, possibly at a scheduled gathering in December, to alter its official output target. The trimming will be achieved by members, mainly powerhouse Saudi Arabia, agreeing to cut excess production above their OPEC quota, which would remove oil from the market but not amount to a formal change in policy. “Of course there is an oversupply,” Iranian Oil Minister Gholam Hossein Nozari said yesterday as he arrived here, underlining Tehran’s desire to see the organization enforce its quota system.
At present, the Organization of Petroleum Exporting Countries (OPEC) is believed to be producing about a million barrels per day (bpd) more than its official ceiling of 29.67 million bpd.
Under fierce pressure from the United States, Saudi Arabia agreed in May and June to increase production by 500,000 bpd to help calm the then runaway crude market. “Both Libya and Algeria have been very critical of the Saudis since their unilateral move,” an analyst for Washington-based consultancy PFC Energy, David Kirsch, told AFP.
On Sunday, Libya called for a reduction in OPEC output. “Anyone that is overdoing their quota should respect it,” Libya’s OPEC representative, National Oil Corporation (NOC) Chairman Shukri Ghanem, told AFP by telephone. “The market is more than oversupplied it seems.”
The stakes are entirely different from the last time OPEC met in March, when prices had broken through $100 a barrel and were on a steep upwards trajectory.
This time, oil prices are on the way down to approaching $100 - a level many members, above all the traditional price hawks of Iran and Venezuela, are keen to protect. Other more moderate OPEC members are happy to see prices fall. “We don’t think there is a requirement for a decrease in production,” said Kuwait’s Oil Minister Mohammad Al-Olaim as he left for Vienna from Kuwait City. Oil prices rose slightly yesterday and developments in the market over the next 24 hours will influence OPEC’s final decision, analysts say. In early European trade, New York’s main contract, light sweet crude for delivery in October, rose $1.41 to $107.64.
Ministers from Algeria, Libya, Kuwait and Qatar were scheduled to arrive yesterday to join their counterparts from Nigeria, Ecuador and Iran who are already here. Others will arrive today. Saudi Arabian Minister of Petroleum and Mineral Resources Ali Al-Naimi is expected overnight.
OPEC’s President Chakib Khelil also said there was plenty of oil in the market and set the stage for a possible output revision at OPEC’s next planned meeting, which he will host in Algeria in December.
“We’re going to have an over-supply by the end of year,” said Khelil, who is also Algeria’s energy and mines minister.
The surplus could be anything from half a million to 1.5 million bpd by early next year, he added.
OPEC produces about 40 percent of world crude and meets regularly to set its production policy, with each member assigned a quota or production target.