Opec ministers headed into their Monday meeting in Vienna signalling that they would maintain the cartel’s official output ceiling against the backdrop of falling oil prices.
However, they were facing calls to react to the spectre of oversupply and a deeper decline in prices, including from within their own ranks.
Oil prices continued to fall on Monday after senior European Union and Iranian officials who met in Vienna underlined progress in last-ditch talks to avert United Nations sanctions over Tehran’s nuclear plans.
New York’s main contract, light sweet crude for October delivery, was down 35 cents to $65,90 a barrel in trading in Singapore from $66,25 Friday when it lost more than a dollar.
The president of the Organisation of Petroleum Exporting Countries, Nigeria’s Oil Minister Edmund Daukoru, publicly said he was ”very concerned” about the situation, just two months after the price of crude peaked at $78,40 a barrel.
”The market is really well supplied. Stocks have really built up. Spare capacity is also building up. Non-Opec capacity is growing quite fast. It is a time to really look at it all,” he told reporters on Sunday.
Daukoru added that the geopolitical situation, one of the key reasons given by Opec for its high-output level, has ”cooled off somewhat”.
Nonetheless, other national representatives from Opec, which provides about a third of global oil supplies, insisted over the weekend that they wanted to maintain the ceiling of 28-million barrels a day set in June 2005.
The 10 members bound by the output ceiling produced about 500 000 barrels per day less than the quota in July, according to figures from Opec.
Saudi Arabian Oil Minister Ali al-Nuaimi dismissed concern about the drop in crude prices and described it as a sign that the market was stabilising.
”The demand is very well satisfied … The market is very comfortable and well supplied. We are very happy with the situation,” he said.
”I don’t expect any change in the quota,” said Shukri Ghanem, head of Libya’s National Oil Company and the country’s representative at the Opec meeting. Falling prices represented ”a correction”, he told reporters.
Qatar’s minister Energy Minister Abdullah bin Hamad al-Attiyah saw ”no other alternative” to the current quota ”unless somebody has another proposal”.
”But I don’t hear it … I don’t hear any new proposal,” he said.
A decision on Monday to maintain the ceiling would continue a policy of keeping the market well supplied in a bid to cool overheating prices.
Oil tripled in value from 2002 to mid-July on surging global demand as well as fears about interruptions to production in Iran, Nigeria and Iraq.
But Opec’s bid to stifle volatility in oil markets could also be turned around to stop prices dropping too low as those pressures ease. Attiyah acknowledged that could be in the cards at the ministers’ next meeting in December in Nigeria.
”If we feel the market needs to cut to stabilise, we will do [so]. So when we come to our next meeting we will have an open agenda. All the scenarios will be discussed,” he said.
Analysts also highlighted the growing prospect that a seasonal decline in demand following peak consumption during winter in industrialised countries could be amplified by the forecast slowdown in the world economy next year.
Carl Calabro of the US consultancy PFC Energy said the output built up for winter stocks appeared to be sufficient.
”The concerns are what happens to prices in spring, when demand falls,” he explained.
”The market needs to be assured that the appropriate actions will be taken in the first quarter [of 2007],” Calabro added.
Jason Schenker, an economist for US financial services firm Wachovia, concurred with Daukoru’s view of supplies and highlighted expectations of a sharp economic slowdown next year.
Schenker even believed there was ”a significant chance” that Opec could hold an additional extraordinary meeting before December. – Sapa-AFP