ABUJA, (Reuters) – OPEC appeared willing on Wednesday to pull back from more oil output cuts, responding to consumer nation calls to hold off until winter has passed to guard against price spikes that would hurt the world economy.
OPEC, which produces over a third of the world’s oil, will hold talks on Thursday to decide whether to curb supplies beyond the 1.2 million barrels per day ministers agreed from Nov. 1.
Some ministers and officials signalled their priority was to ensure compliance with that deal, which succeeded in arresting a 25 percent price slide, before making additional reductions. “I don’t think there will be any cut,” the head of Libya’s delegation, Shokri Ghanem, told Reuters on Wednesday.
OPEC ministers agree the market is oversupplied — stocks in top consumer the United States are the highest since 1998 for the time of year — but some fear cutting during peak demand could drive prices further above $60 and hurt consumer nations.
The opinion of leading exporter Saudi Arabia is key in determining OPEC output policy. Oil Minister Ali Al-Naimi told reporters on his arrival the market was in better shape than when ministers last met, at October’s emergency talks. “The fundamentals of the market are much better than they were in October,” he said, adding: “We probably have a little work to do to make it an even better, more stable market.” “We have to work together as a team,”Naimi said. “We have done well so far, we may have to do some more.”
U.S. Energy Secretary Sam Bodman and International Energy Agency head Claude Mandil have called on OPEC to wait until next year before deciding on further supply reductions.
A delegate from one of OPEC’s Gulf members said there was a strong case for holding fire. “No cut, compliance — this is the view up until now from the Gulf members,” the delegate said.
OPEC research director Hasan Qabazard said if members abided by the deal they struck in October, that should do the job of restoring equilibrium.
Members have delivered almost two thirds of the 1.2 million bpd reduction so far, according to Reuters estimates.
Qabazard estimated compliance higher, at 80 to 85 percent, leaving slack of 200,000 to 300,000 bpd of oil.
The IEA, adviser to 26 industrialised countries, said in its monthly report on Wednesday OPEC cuts from Nov. 1 were making themselves felt, “cold comfort for a risk-prone global economy already facing another winter with high oil prices”.
Some ministers indicated they are prepared to listen to consumer nations’ calls and defer a decision. “If we leave it for now we should review it quickly at the earliest opportunity,” said OPEC President Edmund Daukoru, also Nigeria’s minister of state for petroleum. “The winter is looking warmer than expected and there has been some stocks drawdown but not so steep.”
An OPEC delegate said Algeria, Iran, Kuwait, Qatar and Saudi Arabia favoured stricter compliance with the deal in place and no change to OPEC’s 26.3 million bpd production target. But members remain nervous that normally slack demand in the second quarter could trigger steep price falls next year. “It is highly probable we need to go for a further cut to really be able to stabilise the market for next year,” said Algerian Energy and Mining Minister Chakib Khelil.
Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah said he believed OPEC should stay its hand if prices remained at $60. On Wednesday, U.S. crude rallied to $61.54 a barrel after a bigger-than-expected drop in U.S. crude stocks.
United Arab Emirates’ Oil Minister Mohammed bin Dhaen al-Hamli said OPEC would only cut if “absolutely necessary”. Oil has fallen from a mid-July peak of $78.40 but is still three times the price at the start of 2002 as Asian demand kicked in. Refining constraints and worries over supply from Iraq, Nigeria, Iran and Russia helped fuel the rally.
Venezuela, with a costly social spending programme under President Hugo Chavez, is among those pressing for a cut.
Energy and Mines Minister Rafael Ramirez said he wanted a 500,000 bpd reduction and compliance alone would not be enough.
Cuts in place have already gone some way towards draining oil stocks in the industrialised world that reached 2.76 billion barrels, 55 days of demand, in September.
The IEA’s latest report said stocks fell in October to 2.72 billion barrels, 54 days of demand. Weekly data indicates a further decline in November, the IEA added. “We believe that unless prices fall sharply in the next two days, OPEC will not cut because they will not need to and will not have any incentive to,” said Mike Wittner, global head of energy market research at investment bank Calyon.