RI sees no need for OPEC to end oil production cuts
JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto said on Friday Indonesia would propose to the Organization of Petroleum Exporting Countries (OPEC) an extension of the current production cut through the end of next year.
Kuntoro also said Indonesia did not see the need for any further output cut by the organization before then.
"We prefer to roll over the existing production rate rather than opt for new cuts," Kuntoro said in a weekly press conference.
The minister was speaking ahead of next week's OPEC ministerial meeting Nov. 25 in Vienna.
OPEC has cut its output twice already this year, respectively by 1.245 million barrels per day (bpd) in March and by 1.355 million bpd in June, after raising its output ceiling to 27.5 million bpd in November last year.
Indonesia's production level was cut to 1.2 million bpd in June.
The cuts in output were taken up in response to the continued decline in oil prices after the organization's Jakarta ministerial meeting in November last year raised its output ceiling in a bout of optimism over the rise in market demand.
Oil prices continue to decline despite the total 2.6 million bpd output cut for this year. OPEC earlier estimated that the lower production level would push up oil prices to US$17 per barrel.
Oil prices have remained at the price level of between $11 to $13 since OPEC announced the June production cut.
Brent crude plunged to a new 10-year low on Wednesday at $11.15 a barrel.
Indonesia's earnings from crude oil exports in the state budget for the fiscal year ended in April next year are calculated on an assumed price of $13 per barrel. The fall in the crude oil price to below $13 per barrel will deal a big blow to the state budget.
OPEC has been factionally split in the last few months between proponents of another round of production cuts to boost flagging oil prices and those who simply want to extend the existing cuts through the end of 1999.
Kuntoro speculated that the global recession prompted by the Asian monetary crisis was a factor behind the slump in oil prices, but he also blamed traders for pumping their stock on to the market to make OPEC's output cut ineffective in improving oil prices.
"Producers, both OPEC and non-OPEC members, and traders should work hand in hand to improve the oil price," Kuntoro said.
OPEC groups Indonesia, Saudi Arabia, Algeria, Iraq, Kuwait, Libya, Qatar, the United Arab Emirates, Venezuela, Iran and Nigeria.
Analysts say the slump in oil prices was also caused by the fact that OPEC members have mostly failed to abide by the agreed- on quotas.
According to the data supplied by OPEC primary sources or the governments of each members, Kuntoro said, only four OPEC members complied with their production quotas, including Indonesia.
But, according to the data supplied by OPEC secondary sources, only two members, excluding Indonesia, complied with their quotas.
The secondary sources include the Energy Information Agency, the International Energy Agency, the Center for Global Energy Studies, Platt's, the Cambridge Energy Research Association and Petroleum International Weekly.
In a related development, Reuters reported on Friday that Algeria pressed fellow OPEC members to take urgent collective measures to prop up sagging world oil prices and sent six presidential envoys to plead its case ahead of the group's meeting next week.
The envoys, including Oil Minister Youcef Yousfi, will deliver letters from President Liamine Zeroual to the leaders of Saudi Arabia, Venezuela, Nigeria, Indonesia, Kuwait, the United Arab Emirates, Iraq, Libya and Qatar.
"The special envoys will plead for necessary and urgent collective measures to halt the fall in crude oil prices and find a mechanism to reverse the trend," the Algerian government said in a statement.
It said Yousfi will "insist" at next week's Vienna meeting that all members should respect OPEC decisions on output cuts. (jsk)