Iran leads calls for OPEC oil cut
Monday, 08 September 2008
VIENNA (AFP) — 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 their highs of 147 dollars a barrel in July to about 107 dollars, with the OPEC meeting on Tuesday seen as a test of what price level the cartel wants to defend and its power to influence the market.
Most analysts surveyed by AFP expected 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 their 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, 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 up to one million barrels more than its quota of 29.67 million barrels per day (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 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.
"The key issue in the meeting is reestablishing the consensus and consultation."
The stakes are entirely different from the last time OPEC met in March, when crude prices had broken through 100 dollars a barrel and were on a steep upwards trajectory.
This time, oil prices are on the way down approaching 100 dollars a barrel -- a level many members, above all the traditional price hawks of Iran and Venezuela, are keen to protect.
Prices rose slightly on Monday and developments in the oil 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 a barrel in electronic deals.
Ministers from Algeria, Kuwait, Nigeria, Qatar and Venezuela are set to arrive in Vienna on Monday and begin informal talks ahead of the policy meeting late on Tuesday.
All eyes will be on Saudi Arabian Oil Minister Ali al-Nuaimi, the de facto leader of the group, when he arrives. 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.
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.
Ecuador's oil minister, Galo Chiriboga, whose nation is the smallest OPEC producer, said on Sunday an oil price of 110-120 dollars per barrel was "reasonable" while Iran and Venezuela want at least 100 dollars as a ceiling.
But Saudi Arabian King Abdullah has said he would like prices below 100 dollars a barrel, a level that was considered dangerously high at the beginning of the year.
Libya threw its weight behind Iran's drive to secure a reduction in OPEC production on Sunday.
"Anyone that is overdoing their quota should respect it," Libya's OPEC representative, National Oil Corporation (NOC) chairman Shukri Ghanem, told AFP by telephone on Sunday. "The market is more than oversupplied it seems."