Oil tiptoes down, awaits news on cuts
Oil tiptoes down, awaits news on cuts
SINGAPORE (Reuters): Oil prices were marginally softer on
Monday despite renewed calls from some OPEC producers for fresh
curbs on output when the cartel meets to review production policy
on Friday.
U.S. benchmark light, sweet crude lost 11 cents in electronic
dealings to stand at $27.90 a barrel after retreating more than
30 cents on Friday in New York.
The Organization of Petroleum Exporting Countries is widely
expected to agree a second round of output restraints when it
meets on March 16 to avoid a supply overhang in the second
quarter, a period of seasonally weak demand.
But traders are waiting for a clear signal on the size of any
reduction, which is expected to be between 500,000 and one
million barrels per day (bpd).
A Kuwaiti media report on Monday said Kuwait would back a cut
of between 500,000 and 750,000 bpd.
"Kuwait supports OPEC's inclination for a limited production
cut of between 500,000-750,000," al-Rai al-Aam newspaper quoted
Kuwaiti oil sources as saying.
Oil Minister Adel al-Subaih declined to confirm the report.
Saudi Arabia, the world's largest crude producer, reiterated
on Friday that it saw a strong possibility for an agreement
between the cartel's 11 members to cut production.
Iran, OPEC's second biggest producer, and Qatar again
expressed their wish to see a cut but did not specify how big
this should be.
Iranian Oil Minister Bijan Zanganeh was quoted by state
television as saying on Sunday that the market faced an
oversupply of 2.6 million bpd without a cut in production.
Iran and Qatar also called for producers outside of OPEC to
restrain output.
OPEC's Saudi Arabia and Venezuela were due to hold talks with
non-OPEC Mexico in Riyadh at 1530 GMT on Monday.
Mexican Energy Minister Ernesto Martens held 90 minutes of
talks with Saudi Oil Minister Ali al-Naimi on Sunday during which
they discussed how to balance world oil markets.
It was not immediately clear whether Mexico had been persuaded
to participate in OPEC's widely expected cuts.
Prior to his Riyadh visit, Martens had repeatedly said there
was no need for further output curbs as the global supply-demand
situation was largely balanced, a view also held by non-OPEC
Norway, the world's second largest exporter after Saudi Arabia.
"We have reviewed oil market conditions and we are working
together to preserve market balance and ensure the interests of
producers and consumers," Martens told the official Emirate news
agency WAM after the talks.
Mexico, Saudi Arabia and Venezuela were the architects of a
series of output cuts between 1998 and 1999 following a slump in
oil prices to about $10 a barrel.
Those curbs between OPEC and non-OPEC producers helped to more
than triple crude prices to above $35 a barrel in 2000, the
highest level in a decade.
Soaring energy bills last year, however, raised calls from big
consuming nations for higher output because of the risk of
inflation and damage to economic growth.
OPEC raised production four times in 2000 by a total 3.7
million bpd.
The cartel now fears supplies will far outstrip demand in the
second quarter when peak winter demand ebbs. It is also worried
by signs of a global economic slowdown, which could dent growth
in petroleum demand.
The group wants to keep prices at about $25 a barrel for a
reference basket of crudes. OPEC's reference basket stood at
$25.11 a barrel on Thursday.
The basket price would peg a target level for U.S. crude at
about $29 a barrel.