Friday March 13, 08:28 PM
OPEC eyes oil output cuts as prices senn falling
By Roland Jackson
VIENNA (AFP) - The OPEC oil exporters' cartel braced Friday for a weekend meeting to decide whether more output cuts are needed to support weak crude prices amid a spreading global recession.
Ministers from the Organization of Petroleum Exporting Countries, who convene on Sunday, are concerned about a sharp global economic slowdown that has slashed energy demand, oil prices and OPEC revenues.
The price of crude oil has slumped by around 100 dollars since striking record high points above 147 dollars per barrel last July.
OPEC, which pumps 40 percent of world crude supplies, agreed late last year on cuts to reduce output by 4.2 million barrels per day, but questions remain about the level of compliance among the cartel's 12 member nations.
Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah, quizzed by reporters about the choice between slashing output or looking for greater compliance to stop oil prices falling, replied: "It's to be decided."
"We have to see the compliance," al-Sabah added upon his arrival in Vienna.
"It's all depending on the data. It's a collective decision."
Oil prices edged lower Friday after soaring a day earlier as the market eyed more possible cuts to OPEC's output, traders said.
New York's main futures contract, light sweet crude for delivery in April, dipped 78 cents to close at 46.25 dollars a barrel.
Venezuelan Energy Minister Rafael Ramirez meanwhile called for OPEC members to comply "100 percent" with recent cuts to address oversupply in the market.
There is "a very good level of compliance but we are going to work to have 100 percent of compliance" to boost weak oil prices, Ramirez said, speaking upon his arrival.
"The economic situation worldwide is worse than anybody supposed it to be. Then we have a very bad situation with demand. Demand is destroyed," he said.
In Paris, the International Energy Agency (IEA), which represents oil consumers, warned that a further cut in output would accelerate the global economic crisis.
"Another cut risks being a step too far" in view of the "catastrophic economic news over the past few months," chief IEA analyst David Fyfe warned in comments to AFP.
OPEC's recent production cutbacks, taking 4.2 million barrels out of the market every day, were likely to tighten the oil market, Fyfe said.
And that "would risk a surge in prices: the last thing the economy needs at present."
Oil producers do not agree, however. OPEC warned in a gloomy monthly report that the worldwide recession was already leading to a slump in demand and that prices were therefore likely to continue to slide.
"With continued economic deterioration and demand erosion as well as the impending low demand season, there is likelihood of renewed pressure on prices," the cartel said.
"The world economy is in a dreadful situation with GDP (gross domestic product) sliding into the red for the entire year of 2009. Consequently, world oil demand is slipping steeply to a record low year-on-year."
OPEC estimated that demand would contract by 1.01 million barrels per day (bpd) or 1.18 percent in 2009.
In its previous forecast in February, OPEC had pencilled in a contraction of 0.58 million bpd for 2009.
"Oil prices need to remain at levels that support energy investment across the supply chain to help sustain longer-term economic growth," OPEC argued.
"These are the main issues under consideration when the OPEC Conference meets on March 15."
OPEC president Jose Maria Botelho de Vasconcelos, who also represents Angola, has already suggested the cartel could opt to cut output for the fourth time since September.
OPEC kingpin Saudi Arabia has signalled however that it will seek full compliance with last year's large cuts before looking for another reduction.
Hardline OPEC members Iran and Venezuela have already made it clear that they will seek another output cut on Sunday, and Libya has also indicated that a reduction remains a possibility.
OPEC's official daily output quota currently stands at 24.84 million barrels after the last gathering in December in Oran, Algeria.
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