Brent has fallen to $106 a barrel, down more than $20 from its peak this year of $127.02, on concern of slowing oil demand due to the European debt crisis and a weakening economic outlook for the US.
Iran, holder of the OPEC presidency in 2011, said on Wednesday OPEC ministers could hold an emergency meeting if members started to feel anxious about falling prices.
But there is no prospect yet of the Organization of the Petroleum Exporting Countries holding a meeting before its next scheduled gathering in December or reducing production, delegates from two OPEC members said.
“The situation is very confused,” said an OPEC delegate from a Gulf country.
“Demand is weakening and the economy is not encouraging.”
“But Brent is still more than $100 a barrel. OPEC will wait and see.”
Saudi Arabia, Kuwait, the UAE and Qatar are typically the 12-member organization’s most moderate on prices. Saudi Arabia holds most of its unused production capacity.
Riyadh and other Gulf countries unilaterally increased production after Iran and other members including African countries and Venezuela blocked a proposal at OPEC’s last meeting in June to increase its output targets.
The supply boost has lifted OPEC output to more than 30 million barrels per day in July, its highest this year, according to OPEC estimates published on Tuesday, offsetting the loss of Libyan oil due to the conflict there.
At the same time as reporting the rise in output, OPEC and other forecasters this week have lowered forecasts for 2011 global oil demand growth citing the economic outlook.
Having provided most of the extra barrels, the Gulf countries would be the most likely within the group to reduce their output if they felt there was too much oil in the market.
A delegate from one of OPEC’s African members, which opposed the proposal to boost output in June, also did not expect the group to react to falling prices yet.
“A price of $90 a barrel will be OK,” said the delegate, referring to Brent crude.
“If it goes below $90 and stays there, we may need to hold an emergency meeting. But that is not on the table now. We’re still going to produce what we are producing at the moment because there is no need to reduce.”
The delegate said a drop in the price of Brent to between $90 and $100 would not significantly impact most OPEC countries in terms of their revenue from oil sales.
OPEC delegates are the officials each OPEC member sends along with its oil minister to the group’s meetings. They are not usually authorized to speak on the record.
The group has no collective price target and Iran’s OPEC governor, Mohammad Ali Khatibi, speaking to Iran’s official news agency IRNA on Wednesday, did not say what price threshold he believed would trigger an emergency OPEC meeting.
“OPEC members have not set any price level and they have different opinions, some say $80-90 per barrel is appropriate while others believe higher than $100 is appropriate,” he said.
Saudi Arabia, after a 2008 oil price crash, named $75 as a fair price for oil — acceptable for producers and not so high as to damage consumer country economies and depress demand.
Subsequently though it has avoided naming a price target, saying it prefers simply to supply enough to meet demand.
The Kingdom has left shipments unchanged to Asian and European customers in September even after the fall in prices, industry sources said on Tuesday.
