OPEC chief says more production cuts possible

OPEC chief says more production cuts possible

SINGAPORE (AFP): OPEC President Obaid Saif Al-Nasseri,
lamenting that Asia's economic crisis was beginning to ravage
oil-producing nations, warned here Tuesday that the grouping may
recommend further production cuts to stabilize world oil prices.

The Organization of Petroleum Exporting Countries (OPEC) chief
told reporters on the sidelines of an Asia-Pacific oil industry
conference that the group will have to discuss the issue at a
meeting in November.

"Of course all options are open," he said.

Asked about the options if prices do not improve, he said:
"Well, I think going by the state they are (in) now, it might be
possible to look for more cuts if prices don't improve."

He declined to give any numbers on production cuts to prop up
world oil prices now at a 10-year low.

The price of the benchmark Brent crude for October delivery
stands at about US$12.85 a barrel.

OPEC's average basket price for 1997 was $18.70 a barrel. This
year, it has slumped markedly, hitting a low of $11.90 per barrel
in August.

"The current low oil price environment is unacceptable to our
countries," Al-Nasseri, who is the minister of petroleum and
mineral resources of the United Arab Emirates, earlier told
participants at the 14th Asia-Pacific Petroleum Conference.

He said that Asia's economic slowdown triggered by a severe
currency crisis since mid-1997 had drastically slashed oil demand
and contributed to plummeting prices.

"The present economic crisis has impacted upon a huge growth
area for OPEC's crude exports; this is, in no way, a traditional
static market that has experienced a temporary cyclical
downturn," Al-Nasseri said.

Oil prices fell this year sharply to less than 50 percent of
the average of the last two years and the impact "has been
strongly felt by our economies. "

"There is clearly going to be an enormous collective loss for
essentially single-product economies to absorb," he said,
pointing out that availability of funds to invest in expanding
future oil production capacity would be drastically curtailed.

Al-Nasseri noted that the dramatic fall in petroleum revenue
was being cited as a significant contributing factor to Russia's
economic and political crisis and to economic and social
hardships in other oil-producing nations.

Latin American nations, which include OPEC founder member
Venezuela and which have, in recent years, generally performed
well economically, are also experiencing a new wave of economic
and financial difficulties, he said.

Output cuts

Both OPEC and non-OPEC producers have moved to reverse sagging
prices by agreeing on production cuts. To date, OPEC has
committed to a reduction of 2. 6 million barrels per day with
further production cuts coming from non-OPEC countries such as
Mexico, Russia and Oman in excess of 0.5 million barrels per day.

The reductions have had little effect on international crude
prices because inventory levels still remain high, Indonesian
Minister of Mines and Energy Kuntoro Mangkusubroto told the
conference here.

Although output from the 10 OPEC members promising cuts has
fallen by 1.6 million barrels per day since March, their efforts
to support prices are being undermined by poor compliance, rising
Iraqi exports, weak demand growth and high stocks.

According to industry reports, only 75 percent of the cuts
pledged in March were carried out by the end of the second
quarter and compliance with the new lower targets for the second
half of 1998 slipped to only 62 percent in July.

Many OPEC members have reneged on their pledges to cut
production, said Ng Weng Hong, editor of the Strategist Oil
Report, a Singapore-based petroleum monthly.

"When Asia was posting explosive economic growth rates and
absorbing much oil supplies, the market could tolerate the
cheating by different (OPEC) members but now Asia is not around
to save them," Ng said.