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Iran leads calls for OPEC oil cut PDF Print E-mail
Wednesday, 10 September 2008

AFP, VIENNA - Iran led calls on Monday for OPEC to cut output ahead of a meeting of the oil producer group, with analysts expecting the cartel to begin scaling back production to help support prices.

Oil prices have plummeted from record highs above 147 dollars in July to about 107 dollars, with an OPEC meeting on Tuesday seen as a test of what price level the cartel wants to defend and of its power to influence the market.
 
Most analysts surveyed by AFP expect the 13-nation group to agree to trim its output informally before waiting until later, possibly at a scheduled gathering in December, to alter its official output target.
 
The trimming will be achieved by members, mainly powerhouse Saudi Arabia, agreeing to cut excess production above their OPEC quota, which would remove oil from the market but not amount to a formal change in policy.
 
"Of course there is an oversupply," Iranian Oil Minister Gholam Hossein Nozari said Monday as he arrived here, underlining Tehran's desire to see the organisation enforce its quota system.
 
At present, the Organization of Petroleum Exporting Countries (OPEC) is believed to be producing about a million barrels per day (bpd) more than its official ceiling of 29.67 million bpd, with Saudi Arabia accounting for most of the excess.
 
Under fierce pressure from the United States, Saudi Arabia agreed in May and June to increase production by 500,000 bpd to help calm the then runaway crude market.
 
"Both Libya and Algeria have been very critical of the Saudis since their unilateral move," an analyst for Washington-based consultancy PFC Energy, David Kirsch, told AFP.
 
On Sunday, Libya called for a reduction in OPEC output.
 
"Anyone that is overdoing their quota should respect it," Libya's OPEC representative, National Oil Corporation (NOC) chairman Shukri Ghanem, told AFP by telephone. "The market is more than oversupplied it seems."
 
The stakes are entirely different from the last time OPEC met in March, when prices had broken through 100 dollars a barrel and were on a steep upwards trajectory.
 
This time, oil prices are on the way down to approaching 100 dollars -- a level many members, above all the traditional price hawks of Iran and Venezuela, are keen to protect.
 
Other more moderate OPEC members are happy to see prices fall.
 
"We don't think there is a requirement for a decrease in production," said Kuwait's Oil Minister Mohammad Al-Olaim as he left for Vienna from Kuwait City.
 
Oil prices rose slightly on Monday and developments in the market over the next 24 hours will influence OPEC's final decision, analysts say.
 
In early European trade, New York's main contract, light sweet crude for delivery in October, rose 1.41 dollars to 107.64 dollars.
 
Ministers from Algeria, Libya, Kuwait and Qatar are set to arrive later on Monday to join their counterparts from Nigeria, Ecuador and Iran who are already here. Others will arrive Tuesday.
 
All eyes will be on Saudi Arabian Oil Minister Ali al-Nuaimi, the de facto leader of the group who is expected overnight. He is yet to state an opinion.
 
OPEC produces about 40 percent of world crude and meets regularly to set its production policy, with each member assigned a quota or production target.
 
The dilemma for producers is how to find a balance between their desire for revenues from high oil prices and the danger that high prices could choke off feeble economic growth and antagonise consumers.
 
"Saudi Arabia increased production in the summer without a formal agreement, hence it does not need to make a formal statement of reduction and such (an) announcement would only make stronger enemies," said analyst Olivier Jakob at consultancy Petromatrix.
 
Economic conditions, which determine demand for oil, have worsened in recent months, with many European economies facing recession, the United States struggling and fears growing about the emerging economies of Asia.

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