ORAN, Algeria: OPEC officials yesterday said the oil producers’ organization would decide to cut output when its meets here this week and called on major non-OPEC producer Russia to slash its production as well.
The OPEC secretary general said yesterday that an over-supplied oil market needed a hefty output cut, sending crude prices surging back above $50 a barrel on world markets.
OPEC’s president meanwhile said there was unanimous support in the organization for a cutback as crude demand is set to fall further next year amid a global economic slowdown.
The remarks underpinned market expectations that the Organization of Petroleum Exporting Countries will take action to further boost oil prices at a meeting in Oran tomorrow.
OPEC is expecting Russia to cut its oil output by up to 300,000 barrels a day as part of coordinated measures to halt the plunge in the price of crude, the Russian oil giant Lukoil said yesterday.
The ability of OPEC to influence the market will partly depend on whether it succeeds with a campaign to convince major non-member producers such as Russia, Mexico and Norway to reduce their output too. “We hope the non-OPEC countries will help. The market is in a very difficult situation,” OPEC Secretary General Abdalla Salem El-Badri told reporters on his arrival in the Mediterranean port city of Oran.
He added that he would like to see “a very sizeable cut” in crude oil production, adding that “the market is oversupplied with oil.” And OPEC President Chakib Khelil said: “Everybody (at OPEC) is supporting a cut ... I don’t have any doubt about it.” Khelil added that he hoped Russia would one day become a member of the oil producers’ organization in order to boost the group’s impact on the crude market. “We would like appropriate support on the ground from Russia,” he told reporters. “We have always wanted Russia to join OPEC.
“Russia would be of special importance to OPEC if it joined, it would increase OPEC’s strength in terms of production share, which would become around 50 percent (of world output) rather than 40 percent.” Khelil said on Saturday that Russia would be represented by Deputy Prime Minister Igor Sechin and Energy Minister Sergei Shmatko at the meeting in Oran. Oil prices have plunged by as much as 70 percent since reaching all-time highs of above $147 a barrel only five months ago as a global economic slowdown dents energy demand worldwide. “We are very pessimistic about demand,” Khelil said yesterday.
Kuwaiti Oil Minister Mohammad Al-Olaim meanwhile said yesterday that OPEC would cut output because the market was over-supplied but refused to be drawn on the size of the reduction. “There is a building up of inventories for the time being which have exceeded the average of the last five years. We are talking now about 56.8 days which is more than the average,” Olaim told reporters before departing for Oran.
The price of New York crude oil soared above $50 per barrel to a two-week high point yesterday.
Light sweet crude for delivery in January delivery jumped to $50.05 per barrel, hitting the highest level since Dec. 1 on the New York Mercantile Exchange (NYMEX).
On London’s InterContinental Exchange (ICE), Brent North Sea crude for January leapt as high as $49.96 a barrel, which was also a two-week pinnacle.