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.