Wednesday 29 October 2008

More Cuts if Oil Prices Fall

OPEC chief warns of new output cuts if prices keep tumbling.

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Guanyu said...

More Cuts if Oil Prices Fall

OPEC chief warns of new output cuts if prices keep tumbling.

AFP 29 October 2008

The head of the OPEC oil producers cartel warned on Tuesday that it could cut output again if prices keep falling despite an emergency reduction last week.

OPEC, which produces 40 per cent of the world’s crude, could hold a new emergency meeting before its next scheduled session in December, the Organisation of Petroleum Exporting Countries (OPEC) Secretary General Abdalla Salem El-Badri said.

‘We will have to wait and see how the market will react ... (but) if this problem continues then we will have another cut,’ he told reporters on the sidelines of an oil conference in London.

‘If the situation deteriorated to the point where we had to have another meeting before Algeria we will do that,’ he said, referring to the next scheduled OPEC meeting in Oran, Algeria, on Dec 17.

‘If the market reacted badly (to the cut in oil production) we will meet before that.’

Oil prices rallied soon after the OPEC chief’s comments before dipping again - New York’s main contract, light sweet crude for December delivery, fell nine cents to US$63.13 (S$94.33) a barrel.

OPEC ministers agreed at an emergency meeting in Vienna on Friday to slash output by 1.5 million barrels a day from November 1 as the cartel seeks to shore up prices.

The OPEC chief said a fair price for a barrel of oil would be ‘something in between’ the record high of more than US$147 reached in July and current levels of around US$60.

Venezuelan President Hugo Chavez said he would support further cuts in production ‘until the price stabilises’, during a visit to fellow OPEC member Ecuador.

‘If we had to cut another million barrels’ production, Venezuela - which produces 3.3 billion barrels a day - ‘would have no problem in proposing and approving a measure like this,’ he said.

Speaking before hundreds of oil industry executives at the Oil and Money conference in London, OPEC chief El-Badri earlier said the organisation could not be expected to bail the world out over the current economic crisis, particularly since it was ‘created in the (United) States’.

Meanwhile, the energy minister of OPEC member Qatar, Mr. Abdulla bin Hamad al-Attiyah, rebuffed criticism, notably by Britain and the United States, over OPEC’s production cuts.

‘If you’re saying to me “no, don’t do it,” give me the alternative, give me the solution. But you can’t say to me ‘don’t do it, you’re the bad boy,’ but with no solution,’ he said.

The United Arab Emirates’ Energy Minister Mohamed Dhaen Al Hamli, whose country is also an OPEC member, warned that low oil prices would be ‘very dangerous for the world economy’ and could lead to a crisis of investment.

The OPEC chief said Britain had cancelled plans for a December summit of oil producer and consumer countries, due to difficulties over who would attend.

The meeting had been scheduled for Dec 19.

‘The British government cancelled the summit ... the British were not clear, they did not invite some of the (OPEC) heads of state,’ he said.

Mr. Brown’s Downing Street office later said the summit was still on.

Mr. Brown first raised the possibility of a summit meeting at talks in Jeddah in June, when Saudi Arabia’s King Abdullah launched an offensive against oil market speculators and called for greater transparency in oil market dealings.

But assembling the guest list for the meeting has proved a headache, in particular over whether to invite Iranian President Mahmoud Ahmadinejad, whose country is a key OPEC member but who is shunned by London.

‘If they do not invite all the ministers, I cannot attend,’ Mr. El-Badri said. -- AFP