OPEC to meet as oil prices drop (updated)

UPDATES: Opec on Thursday called an emergency meeting to discuss reducing its oil production to halt the recent collapse in oil prices. In an unusually frank statement, the cartel said it was concerned about the “deteriorating economic conditions with contagion risks.” The language hints that even the group’s most powerful members are now considering action “amid growing unease over the situation”. Opec will meet on November 18 in Vienna, a month before it was originally to have its next meeting.  The cartel has already pledged to reduce production by more than 500,000 barrels a day, but has so far only gone a fraction of the way towards that goal.   Crude oil prices extended on Thursday their drop in spite of Opec’s decision, suggesting that the market doubted that Opec could launch a co-ordinated campaign to reduce significantly its output to outweigh the impact of the economic crises, which has severely dampened oil demand, especially in the US.  US crude oil futures dropped $1.75 to $87.15 a barrel after having hit a 10-month low of $86.50 a barrel on Wednesday.  The US Department of Energy reported on Wednesday that the country’s oil demand averaged 18.66m barrels a day last week, down 8.6 per cent against the same period a year ago as the economic downturn takes its toll on oil consumption.

Olivier Jakob, of Swiss-based consultancy Petromatrix, said: “Be it in November or in December, be it formally or informally, Opec will need to reduce production not because the price is currently too low but because there is not enough demand.”  The Opec basket, a measure of the group’s oil prices, fell on Wednesday to $77.38 a barrel, below the $80 that some members of the cartel have suggested is their minimum price.

Chávez says OPEC is calling for extraordinary meeting. Venezuelan President Hugo Chávez said on Wednesday that the Organization of Petroleum Exporting Countries (OPEC) is holding an extraordinary meeting, at a time when oil prices have dropped sharply amid concerns of global tumbling demand. "(Venezuelan Minister of Energy and Petroleum) Rafael Ramírez told me Tuesday night that an extraordinary meeting of OPEC would be convened," said Chávez without elaborating during at an economic forum, Reuters reported.