The Organisation of the Petroleum Exporting Countries’ (Opec) president and oil powerhouse Saudi Arabia stepped back from direct calls to slash output on Wednesday, the eve of the group’s year-end meeting, in potential good news for consumers worldwide.
But some oil ministers stood firm in demanding new cuts to shore up prices. That left open prospects for Thursday that range from keeping the status quo to agreement on additional cutbacks two months after deciding on reductions of 1,2-million barrels a day — or something in between; deferral of any decision until early next year.
Still, the possibility of a small immediate reduction in output — or a bigger one early next year — grew late on Wednesday, with Dow Jones Newswires, citing an unnamed Opec delegate, reporting that an immediate cutback of 300 000 barrels a day was being considered.
That avenue could be proposed by an advisory panel to the full meeting on Thursday along with an alternate suggestion — a reduction in output of 500 000 barrels a day from February 1, the delegate said.
Earlier, Opec official Hasan Qabazard, who attended the meeting of the panel — Opec’s ministerial committee — suggested it was deadlocked, saying it had “no recommendation”.
Sentiment for tightening the oil taps within the 11-nation Opec is driven by concerns over ballooning world inventories, a weak dollar and higher production from non-members.
Shudders
A skittish market has also sent shudders through Opec ranks. Oil prices peaked at $78,40 a barrel in July and then plummeted toward $55 last month before rising to present levels in the low $60s — just above the red line for most member nations.
Even moderate Saudi Arabia, whose voice carries weight proportionate to its status as Opec’s top producer, had indicated it might be leaning toward endorsing a further cutback, with its Oil Minister, Ali Naimi, speaking of the need to slash 100-million barrels from bulging world inventories.
But on Wednesday, he expressed less sentiment for such a move, saying that the October agreement to reduce output was a “good decision” that had helped cut supply closer to demand.
Citing a report from the International Energy Agency, Naimi said “about 50-million barrels” has been removed from world stockpiles, so “the market is much better”.
That report said that the previous Opec production cutbacks — while short of their daily 1,2-million barrel target — now amount to 780 000 barrels a day and have sliced deeply into global oil inventories.
The agency said that total Opec daily output in November was 28,9-million barrels. With the exclusion of Iraq, which is exempt from quotas, the group produced 27,1-million barrels a day.
“Without doubt … [the] output cuts have the potential to tighten the oil market this winter, and offer little prospect … of a recovery in stock cover,” the report said.
Naimi said: “Don’t worry about the prices” — and he appeared to be right. With fresh data showing a drop in United States and worldwide crude inventories on Wednesday, light, sweet crude futures for January rose from Tuesday’s close of $61,02 a barrel.
Opec president Edmund Daukoru, who is also Nigeria’s Oil Minister, also appeared to retrench on the need to trim output, saying Opec needs first to “look at the facts” before making a decision.
Such comments suggested that Opec might defer any decision on cuts until January.
Reductions
But price hawks Iran, Algeria and Venezuela remained firm on the need for reductions now.
Algeria’s Oil Minister, Chakib Khelil, said on Wednesday the group faces a “very dangerous situation” in the next few months because of weak demand, high global stocks and increased competition from non-Opec suppliers.
“It is highly probable that we need to go for another cut to be able to stabilise the market for next year,” he said.
Iran — second only to the Saudis in Opec output — also called for cutbacks, along with Venezuela, which proposed reductions of 500 000 barrels a day.
“There’s a lot of crude out there and with additional non-Opec supply anticipated to hit the market next year they’ve got every reason to be worried about where inventories are heading over the next few months,” said David Dugdale, of MFC Global Investment Management in London, of such sentiments.
A major factor at the meeting will be the level of oil inventories in the US and other large consuming nations. Because of lower-than-expected refinery operations, crude oil inventories stand at a 12-year high for this time of year, at near 340-million barrels.
Still, the US Energy Department released data on Wednesday showing a 4,3-million-barrel drop in US crude oil inventories last week, while the International Energy Agency said in its monthly report that stockpiles of crude in industrialised nations fell by 40-million barrels in October. — Sapa-AP
Associated Press writer Dulue Mbachu contributed to this report