CAIRO, 9 December 2004 — After wrestling oil prices down from record summits with the highest output for a quarter century, OPEC members weighed calls yesterday to reduce production following a recent market slump.
Ministers of the Organization of Petroleum Exporting Countries (OPEC) were arriving at a plush Cairo hotel on the banks of the Nile where they are due to meet Friday amid tight security to set output for the first quarter of 2005.
Saudi Arabia yesterday said the organization’s Friday meeting aimed to steady falling oil prices and played down fears among fellow members of a supply surplus.
“We never meet without an objective and when we have an objective we take action. We will strive to stabilize the market,” said Minister of Petroleum and Mineral Resources Ali Al-Naimi.
With falling oil prices and a weak dollar cutting into recent windfalls, Libya called for a cut in output of one million barrels a day (bpd), but it was far from clear whether other members would support the proposal.
“We were working very hard when the price went very high to the sky. Now we should work the same way when the price is going down,” Libyan Oil Minister Fathi Hamed Ben Shatwan told reporters in the Egyptian capital.
He said the 11-member organization needed to lower production either by ending cheating on quotas, or by reducing the official output ceiling of 27 million bpd.
OPEC members are estimated to be producing 1.0-1.5 million bpd above quotas. “We need at least a real decrease of one million (bpd),” the Libyan minister said. “One million is enough to stop this decrease in prices this time. But for the next (second) half of 2005 maybe we’ll need more.”
However, OPEC President Purnomo Yusgiantoro said that the organization might postpone a cut until a clearer picture of supply and demand emerges in the first quarter of 2005. “We may do it (cut the quota), pending the situation in the first quarter,” Yusgiantoro, who is also Indonesia’s energy minister, said in Jakarta before leaving for Cairo. “My feeling is we’ll have to wait to see the situation in the first quarter because winter will still be around then,” he said.
OPEC, which supplies about 40 percent of the world’s oil, has been pumping for months at close to full capacity to try to control skyrocketing prices. Oil prices have now fallen by about a quarter from the record high of $55.67 a barrel seen in New York in October as supply fears faded. Crude prices climbed yesterday despite news of increases in US commercial energy reserves.
New York’s main oil contract, light sweet crude for delivery in January, rose 79 cents to $42.25 a barrel in late morning deals, as OPEC kept markets guessing about its intentions. “We had some (OPEC) countries saying that they would cut production and others saying that they would stick to their quotas,” said Veronica Smart, an analyst at the Energy Information Center, a British-based consultancy firm. “There are still some concerns, particularly in the winter months, that a cut in output would trigger supply issues,” she added.
In the week ending Dec. 3, US inventories of crude oil rose 600,000 barrels to 293.9 million, gasoline climbed 2.4 million barrels to 208.1 million, and distillates rose 1.4 million barrels to 119.3 million, according to figures from the Department of Energy. Prices tumbled by over 13 percent in just three days last week on news of rises in US petroleum stockpiles.
The newly-appointed United Arab Emirates energy minister said late on Tuesday that OPEC should consider cutting back output if oil prices continue to slide. “All options are open to the (OPEC) ministers. It might be appropriate to adhere to production quotas in the first stage because this enhances the organization’s credibility,” Mohammed ibn Dhaen Al-Hamli said.
