VIENNA: Oil producer group OPEC (the Organization of Petroleum Exporting Countries), which pumps 40 percent of world crude, is to keep its production unchanged at a meeting here yesterday, the group’s president said, despite sinking prices and slowing economic growth. “We are going to stay with the level of production where we are now,” OPEC President and Algerian Energy Minister Chakib Khelil told reporters ahead of a formal decision later in the day. “Even if we would cut now, we don’t know if it would stop prices from falling,” he added.
Oil prices peaked above $147 in July this year, but now threaten to plunge below $100 as a global economic slowdown bites and demand for oil weakens.
Earlier yesterday, Saudi Arabia voiced satisfaction at the drop. “We have worked very hard since June’s meeting to bring prices to where they are now. I think everything is in balance,” said Minister of Petroleum and Mineral Resources Ali Al-Naimi.
The stakes for OPEC are entirely different from the last time the group met formally in March when prices had broken through $100 and were on a steep upward trajectory. This time, oil prices are on the way down, hovering near $100 — a level many members, above all traditional price hawks Iran and Venezuela, are keen to protect.
Oil prices slumped close to $101 a barrel yesterday, their lowest reading since the start of April.
Brent crude oil prices fell below $100 a barrel for the first time in five months yesterday. London Brent fell $3.88 to $99.56 a barrel — the first time world oil prices have traded in the double digits since April 2 — while the US benchmark fell $3.55 to $102.79 a barrel. New York’s main contract, light sweet crude for October, shed $2.16 to $104.18 a barrel. It had fallen at one point to $104.09.
The dilemma for producers is how to find a balance between their desire for revenues and the danger that high prices could choke off feeble global economic growth. Some analysts had suggested OPEC would opt for a “quiet” production cut as demand for oil falls. This would be achieved by Saudi Arabia reducing its output above its official quota without formally announcing a policy switch.
OPEC policy is to limit output for its 12 members with quotas at 29.67 million barrels per day (bpd), but they are thought to be producing about a million bdp more than this.
OPEC’s meeting in Vienna, which is expected to begin at 2100 local time (1900 GMT) because of fasting for the month of Ramadan, is the group’s first official gathering since March.
A decision to keep output steady would provide welcome relief to consumers in oil importing nations who are struggling with the rising cost of heating and transport.
“All I have asked is that not only the members of OPEC but all suppliers to the world markets keep the markets well-supplied,” US Energy Secretary Samuel Bodman told reporters in Washington.