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Oil market watches OPEC for action on falling prices
By Amelie Herenstein
AFP
PARIS
Petroleumworld.com 09 27 06The oil market is watching OPEC closely for signs the exporter group might be preparing to cut its output ceiling, but the cartel insisted Tuesday that it felt no urgency to act.
Oil prices have fallen by nearly 25 percent since July, dipping to six-month lows below 60 dollars per barrel on Monday, which has raised expectations that the 11-member group might act to stem declines.
OPEC left its production quota unchanged at 28.0 million barrels per day (bpd) earlier this month, continuing a policy that dates back to June 2005 when the organisation raised its quota to a near 25-year high in a bid to curb rising prices.
A spokesman for the Organisation of Petroleum Exporting Countries said Tuesday that the cartel would meet again in Nigeria in December but underlined that there were no plans for an emergency meeting to sanction a production cut in the meantime.
"There is really no meeting planned as of now. The (OPEC) president is always in consultations with the other ministers and they're discussing the matter but there is no emergency meeting scheduled," the spokesman said.
At the time of the last OPEC meeting in Vienna on September 12, prices had begun to fall from their high of 78.40 dollars per barrel reached in July, causing anxiety for some countries.
Venezuela and Iran, the traditional hawks in OPEC, had suggested they saw 60 dollars per barrel as a lower limit for prices, while OPEC President and Nigerian Oil Minister Edmund Daukoru had said he was concerned by the abrupt falls.
Analysts at French investment bank Societe Generale commented: "On OPEC's side, the debate on the floor price the organisation should defend in order to 'stabilise' prices has started."
They suggested that 55 dollars per barrel was the "most often evoked" level.
Mark Pervan, an energy analyst for Daiwa Securities in Melbourne, added: "The market is watching out for any signs of what OPEC might do and what prices they may support."
Much will depend on the view of Saudi Arabia, the most influential member in the cartel. Saudi Oil Minister Ali al-Nuaimi showed no sign of concern at the meeting earlier this month, saying the price falls were a simple correction.
The switch in focus to falling prices poses a new dilemma to OPEC, which has been pre-occupied in the last few years with the opposite phenomenon. Oil prices have tripled since 2002.
At high levels, prices reduce demand by encouraging conservation and greater efficiency, but the cartel must balance this consideration against the need to maximise returns from its exports and stabilise prices to enable long-term planning.
Analysts at influential oil consultancy CGES said that OPEC members, particularly Saudi Arabia, could influence prices surreptiously by gradually reducing their output without changing the official output ceiling.
Nuaimi admitted at the OPEC meeting in September that Saudi production was 300,000 barrels per day less than at the beginning of the year, measuring 9.2 million barrels per day.
"The Kingdom has been quietly allowing its output to be trimmed lately by refusing to increase the discounts on its heavy crude," said CGES.
"The Saudis will probably continue to let their output decline slowly until the pressure proves too great."
Oil prices have fallen by 25 percent since their high in July because of easing geopolitical concerns regarding Iran, a mild US Atlantic hurricane season, healthy US energy stockpiles, and signs that the US economy might slow next year.
AFP 26 1537 GMT 09 06
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