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Oil prices slide on scepticism over OPEC output cut
AFP
NEW YORK
Petroleumworld.com 10 11 06
Crude prices dropped below 59 dollars here Tuesday as traders cast doubt on the chances of the OPEC cartel cutting its production.
New York's main contract, light sweet crude for delivery in November, dived 1.14 dollars to close at 58.52 dollars a barrel.
In London, Brent North Sea crude for November delivery slumped 1.20 cents to settle at 59.34 dollars a barrel.
Traders remained concerned about the nuclear test announced by North Korea on Monday, while fresh unrest in Nigeria cost Shell about 12,000 barrels per day (bpd) in lost oil production.
But the focus was on growing talk from the Organisation of the Petroleum Exporting Countries about a potential supply cut to support prices, which have tumbled from summer highs above 78 dollars a barrel.
Kuwait's energy minister said Monday that his country was willing to cut its oil production to protect "market stability", shortly after OPEC's president -- Nigerian oil minister Edmund Daukoru -- called for output to be slashed.
"We accept to cut production depending on market needs, in order to safeguard the stability of the market," Sheikh Ali al-Jarrah al-Sabah told reporters.
The Kuwaiti said that ministers of the oil cartel were studying a cut of between 700,000 and one million bpd.
The cartel has held its official output quota at 28 million bpd since June 2005, but actual OPEC production is estimated by analysts to stand at around 27.5 million bpd.
The 11 OPEC nations are locked in debate over whether the proposed cuts would come from their theoretical quotas, or from their actual production levels now.
"For over a year we warned that OPEC had a major problem with quotas and that should it become necessary or expedient to cut production they were ill-prepared to do so," James Williams at WTRG Energy Economics said.
"The confused reports of the last week just serve to underline the problem faced by OPEC," he said.
Analysts noted that some OPEC members, like Indonesia and Venezuela, have long been struggling to meet their official output quotas after failing to keep their drilling infrastructure up to speed.
So the brunt of any cuts would fall on other members that are producing more than their quotas, such as Algeria, Qatar and the United Arab Emirates.
"Neither we nor the market would believe this scenario. It is inconceivable that Algeria would cut its production by 40 percent. An across-the-board reduction in quotas will not work," Williams said.
Indonesia's energy minister Purnomo Yusgiantoro said Tuesday he had received a request from OPEC headquarters that cartel members consider cutting their production by one million bpd on a pro-rata basis.
But he did not give any further details such as when the proposed reduction would take effect.
The oil ministers of Iran and Venezuela meanwhile expressed concern over the "instability of the oil market", Iranian state television reported Tuesday.
"OPEC ministers remain divided over whether to formalise the deal," Sucden analyst Michael Davies said.
The cartel's two largest members, Saudi Arabia and Iran, are pushing for an emergency meeting in Vienna next week to ratify an agreement to reduce output.
Kingpin Saudi Arabia is believed to favour a reduction in its official output of 300,000 bpd, according to analysts.
"The final details have not been agreed -- or at least announced -- and sceptical market participants are waiting for the formal deal and possibly a formal meeting," Calyon analyst Mike Wittner said.
AFP 10 1953 GMT 10 06
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