The Organisation of Petroleum Exporting Countries has not yet reached agreement on whether to leave crude output volumes unchanged as the price of oil continues to fall. Talks resume today.
The Organisation of Petroleum Exporting Countries has not yet reached agreement on whether to leave crude output volumes unchanged as the price of oil continues to fall. Talks resume today (Thursday).
The ministers had lengthy discussions in Vienna on Wednesday to find a solution to the plummeting oil price. A source said they had decided that they would not raise or lower production quotas in this unstable time, but no announcement has been made as the ministers formalise an accord. They must also agree on the language of a final statement, which is likely to include references to the impact of the September 11 World Trade Centre attacks on the world’s economies.
The price of crude dropped this week amid fears of an economic recession after the terrorist attacks in the United States this month.
Opec president Chakib Khelil, a former World Bank economist, said the group’s “general feeling is that it would be dangerous for the world economy and for producers to take a decision to lower or raising output”.
The oil price fell further late on Wednesday. Brent crude futures were down R6,80 at R183 a barrel. A fall below R181 would have prices at their lowest in nearly two years.
The ministers are aware that western economies reeling from the September 11 attacks would be against a cut in output.
Ali al-Naimi, Saudi Arabia’s oil minister, said Opec could not react to every yo-yo movement in the market. He said Opec’s decision in July to cut production by one million barrels a day on September 1 had yet to show its real impact in the market.
Under normal circumstances if the average Opec price of crude stays below R187 for 10 working days, Opec could then cut down on 500 000 barrels a day. This started on Monday. But it is likely that Opec will set aside this practice due to the current political climate.
“The only clock that is ticking for Opec is not its market mechanism, but President Bush’s clock for retaliation for the terrorist attacks two weeks ago,” Raad Alkadiri, an analyst with the Washington-based Petroleum Finance Company, told the Financial Times.
