Oil prices will recover to $22 if OPEC cuts output: Purnomo

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Minister of Energy and Mineral Resources Purnomo Yusgiantoro expressed optimism on Wednesday that oil prices would recover to around US$22 per barrel if the Organization of Petroleum Exporting Countries (OPEC) cuts oil output by 1 million barrels per day (bpd).

"We hope OPEC will cut production by that amount. With the cut, I'm optimistic that prices will reach $22 again," he said after opening a two-day international mining and electricity exhibition and conference.

Purnomo added that the oil consortium must also lobby non-OPEC oil producers to lower production, otherwise OPEC's move would prove futile.

International crude prices have continued to weaken due to the world economic slowdown, worsened by the Sept. 11 terrorist attacks on Washington and New York.

The prices have been hovering below $20 per barrel over the past few days and there have been rising fears that the price could fall to below $10 per barrel.

The 11 OPEC member countries will convene in Vienna on Nov. 14 to appraise market conditions and set the production target.

OPEC, which produces about 40 percent of the world's oil, has already cut its output quota three times this year.

Under OPEC's price accord, if the price of its range of seven crude oils rise above $28 a barrel for 20 consecutive days, the organization will increase production by 500,000 bpd. Conversely, if the price drops below $22 output will be cut by 500,000 bpd.

OPEC secretary-general Ali Rodriguez said this week that cuts of more than 1 million bpd were a "possibility". Rodriguez did not specify the exact size of a possible reduction.

Purnomo said that if oil prices reach $22 per barrel, it would help the government secure its revenue target from oil and gas in the 2001 state budget.

Indonesia, the only OPEC member in the region, relies heavily on oil revenue to finance its state budget.

The minister has repeatedly said that the government would be able to meet its oil and gas revenue target this year as it had enjoyed profits when oil prices were considerably higher than the budget assumption of $24 per barrel in the first half of the year.

This, he said, would offset the fall in prices after the Sept. 11 attacks.

Purnomo said he was optimistic that next year's oil prices would hover around $22 despite a gloomy outlook for the global economy.

The 2002 state budget assumes an average oil price of $22 per barrel.