VIENNA (AFP) — Saudi Arabia expressed satisfaction with recent steep falls in oil prices on Tuesday and appeared in no mood to approve a cut in output by the OPEC group despite fears among some members of oversupply.
“We have worked very hard since June’s meeting to bring prices to where they are now. I think everything is in balance,” said Saudi Arabia’s Oil Minister Ali al-Nuaimi ahead of an OPEC meeting here later in the day.
The Saudi kingdom, the world’s biggest crude producer and de facto leader of the Organisation of Petroleum Exporting Countries, has come under fierce pressure from the United States and other allies over record crude prices.
The country agreed in May and June to pump an extra 500,000 barrels per day (bpd) to help bring down the runaway oil market, which peaked at 147 dollars a barrel in July but has now fallen back to about 105 dollars.
The Saudi position sets up a clash with other OPEC members at the meeting on Tuesday, where the 13-nation organisation is set to decide on its new production policy.
Iran, Venezuela, Libya and Algeria have all raised worries about oversupplying the market, suggesting a reduction in production by the group could be needed to help maintain prices.
OPEC President and Algerian Energy Minister Chakib Khelil said on Monday that a production cut would be discussed by the group, which pumps 40 percent of world oil.
“Everybody agrees that we will have an oversupply problem of between half a million and one-and-a-half million (bpd) by early next year,” he said as he arrived in Vienna.
Before the meeting, many analysts had expected OPEC to agree to trim its output informally before waiting until later, possibly at a scheduled gathering in December or before, to alter its official output target.
The trimming would be achieved by members, mainly Saudi Arabia, agreeing to cut excess production above their OPEC quota, which would remove oil from the market but not amount to a formal change in policy.
This “quiet” solution to the problem of oversupply remains a possibility, with Iran pushing hard for greater adherence to the OPEC quota system.
Saudi Arabia has been producing record amounts of oil, around 9.6 million bpd in July, while its quota is for only 8.94.
An OPEC committee comprising Iran, Nigeria and Kuwait that met Monday to formulate a policy recommendation for the larger group broke up without agreement, according to Iranian Oil Minister Gholam Hossein Nozari.
“No recommendation,” he said as he headed back to his hotel late on Monday.
A senior OPEC official quoted by Dow Jones Newswires said there was “still some division” on how the export group should proceed.
The stakes are entirely different from the last time OPEC met in March, when prices had broken through 100 dollars a barrel and were on a steep upwards trajectory.
This time, oil prices are on the way down approaching 100 dollars — a level many members, above all the traditional price hawks of Iran and Venezuela, are keen to protect.
Furthermore, the producers face an uncertain outlook for oil demand, with economic growth slowing and consumers across the world taking measures to reduce their energy consumption as prices for heating and transport rise.
Ahead of the OPEC meeting, world oil prices slipped in Asian trade.
New York’s main contract, light sweet crude for October delivery, dropped 55 cents to 105.79 US dollars a barrel at the close of floor trading Monday in the United States.
Brent North Sea crude for October delivery fell 14 cents to 103.30 dollars.
With prices falling, this OPEC meeting has cast a spotlight on the minimum price that the group’s members would like to see.
Iran and Venezuela have identified 100 dollars a barrel as their floor, Ecuador has referred to 110-120 as “reasonable”, while analysts see Saudi Arabia and other Gulf states as being comfortable with a figure below 100 dollars.
“The Saudi position was that prices were too high,” said Vera de Ladoucette, an analyst at the CERA energy consultancy.
“I believe that the ceiling for them isn’t 100 dollars but rather 80. They are watching what is happening and prices have certainly fallen, but they are still 12 percent higher than at the beginning of the year.”
At present, OPEC is believed to be producing about a million bpd more than its official ceiling of 29.67 million bpd, with Saudi Arabia accounting for most of the excess.