Posted on 09/09/2008 1:33:12 PM PDT by G8 Diplomat
Oil prices slump close to 101 dollars on Saudi oil minister output comments ahead of OPEC meeting.
VIENNA - The OPEC oil cartel, which pumps 40 percent of world crude, will decide to keep the level of its production unchanged at its meeting here, the group's president said on Tuesday.
"We are going to stay with the level of production where we are now," OPEC President and Algerian Energy Minister Chakib Khelil told reporters.
"Even if we would cut now, we don't know if it would stop prices from falling," Khelil said.
He added however that there risked being excess supply in the market -- an "overhang" -- and suggested that the group could meet again before a scheduled December gathering.
"Another meeting is an option," he said.
Saudi Arabia expressed satisfaction with recent steep falls in oil prices on Tuesday and appeared in no mood to change OPEC's output policy at a meeting here as crude slipped to near 100 dollars a barrel.
"We have worked very hard since June's meeting to bring prices to where they are now. I think everything is in balance," said Saudi Arabia's Oil Minister Ali al-Nuaimi ahead of an OPEC policy meeting here later in the day.
The Saudi kingdom is the world's biggest crude producer and de facto leader of the Organisation of Petroleum Exporting Countries.
The country agreed in May and June to pump an extra 500,000 barrels per day (bpd) to help bring down then runaway oil prices, which peaked above 147 dollars in July but now threaten to dive into double digits again.
At present, OPEC is believed to be producing about a million bpd more than its official ceiling of 29.67 million bpd, with Saudi Arabia accounting for most of the excess.
Iran, Venezuela, Libya and Algeria have all raised worries about oversupplying the market as global economic growth weakens.
"We believe there is a level of overproduction of between one million and one million and a half (barrels per day)," said Venezuelan Energy Minister Rafael Ramirez as he arrived.
He said there was no need to change production, however.
The stakes for OPEC are entirely different from the last time the group met formally in March when prices had broken through 100 dollars and were on a steep upwards trajectory.
This time, oil prices are on the way down approaching 100 dollars -- a level many members are keen to protect.
Furthermore, producers face an uncertain outlook for oil demand, with economic growth slowing and consumers across the world taking measures to reduce energy consumption as prices for heating and transport rise.
The dilemma for producers is how to find a balance between their desire for revenues and the danger that high prices could choke off economic growth.
Oil prices slumped close to 101 dollars on Tuesday, their lowest level since the start of April, as the market awaited OPEC's decision.
Brent North Sea crude for delivery in October dropped as low as 101.27 dollars in London trading. It later stood at 102.26 dollars, a loss of 1.18 dollars from Monday's close.
New York's main contract, light sweet crude for October, shed 1.20 dollars to 105.14 dollars after briefly falling close to 104 dollars.
With prices falling, this OPEC meeting has cast a spotlight on the minimum price that group members would like to see.
Iran and Venezuela have identified 100 dollars as their floor, Ecuador has referred to 110-120 dollars as "reasonable", while analysts see Saudi Arabia and other Gulf states as being comfortable with a figure below 100 dollars.
"The Saudi position was that prices were too high," said Vera de Ladoucette, an analyst at the CERA energy consultancy.
"I believe that the ceiling for them isn't 100 dollars but rather 80. They are watching what is happening and prices have certainly fallen but they are still 12 percent higher than at the beginning of the year."
I’d say this is another case of bad news for the DemocRATS. It’s been a bad month for them. OPEC must have heard the message that Americans are sending to Washington. Once Americans start drilling, the party is over for OPEC.
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