ALGIERS (Reuters) – OPEC members have no choice but to implement agreed output cuts and inform customers of the reductions if they want a stable oil price between $70-$90 a barrel, OPEC President Chakib Khelil said on Sunday.
Khelil, who is also Algeria’s energy and mines minister, told Algerian state radio that Saudi Arabia was key to the success of the reductions, and if the world’s biggest oil exporter took its time over the operation the oil price could be affected.
“I think that’s what the market is waiting for now — to see that there really is a reduction in the market and not take at face value the declarations of the different deciders about a cut, or another cut, or about their intentions. It’s what is seen on the market that will affect prices,” he said.
Asked what effect British Prime Minister Gordon Brown’s visit to Saudi Arabia on Sunday could have on OPEC’s plan to stabilize prices, Khelil replied: “Everything depends on the impact on the decision of Saudi Arabia …Therefore, if it slows the cut, or does not do it, then of course there will be an impact on the oil price.”
The Organization of the Petroleum Exporting Countries (OPEC) decided at a meeting in Vienna on October 24 to chop production by 1.5 million barrels per day or about 5 percent from November 1 to halt a more than 50 percent slide in prices.
Traders are now looking for evidence that they are making good on that promise. A key signal would be Gulf suppliers sending word to Asian refiners that volumes will be reduced.
Khelil said: “Until now, Saudi Arabia has not yet informed its clients of the cut of 5 percent that we have agreed, while all the other members have done this, and I myself have written to the members to inform them that this should be done because this is the only means for the market to see that we are really serious about the Vienna decision.”
Saudi Arabia normally informs its customers how much crude it will sell them by the middle of the preceding month. The kingdom has been supplying Asian refiners with their full contracted volume since late last year.
Khelil said he believed all OPEC members were satisfied by new, lower volumes assigned to them under OPEC agreements.
“We will not review the policy of quotas because everyone is satisfied with the quotas,” he said.
“Members have no other choice if they want stable prices between $70 and $90. They have no other choice but to carry out the reduction of their output.”
Asked if oil prices would rise or fall, Khelil said expected oil prices to rise long term.
“Everything depends on the world economic situation. If this situation continues to deteriorate it is very clear that the demand that is seen in the market will diminish, and there will a tendency for the oil price to fall.
“On the other hand if the dollar weakens against other currencies we will see an increase, a move in the opposite direction. The impact of all these elements will decide the price of oil.”
“In the long term, in two or three years, we can say that we will see the oil prices evolving higher, because … there are (production) projects that have been stopped. Therefore we will see in the long term a rise in the price of oil.”