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By Edward Yeranian
29 November 2008
OPEC on Saturday deferred a decision on a new oil supply cut until a meeting in Algeria on December 17. OPEC member states have been meeting in Cairo at an emergency session to discuss possible measures to stop the steep, recent decline in world oil prices. For VOA, Edward Yeranian reports for VOA from Cairo.
OPEC members delayed a decision on whether to cut production again this year until December, giving them more time to assess previous attempts to halt a plunge in prices.
According to Chakib Khelil, the group's president, will carry out a "close scrutiny" of the market in the run-up to a meeting in Oran, Algeria, on December 17. Khelil told reporters after Saturday's Cairo meeting that OPEC will "take any additional action" to "achieve market stability" at that time.
|OPEC president, Chakib Khelil (center), talks during the Organization of Arab Petroleum Exporting Countries (OAPEC) meeting in Cairo, Egypt, 29 Nov 2008|
OPEC called this "consultative" meeting of ministers for Saturday rather than wait until its next scheduled conference in Algeria, as the slowing world economy reduced global consumption faster than expected.
OPEC members have a delicate balancing act to perform as they strive to boost prices without overreacting in terms of production cuts and being blamed for exacerbating the economic slowdown.
Saudi Oil Minister Ali al-Naimi says that no cut will be made before next month.
He says that Saturday's meeting is just for consultation and in preparation of the next official meeting in Oran, Algeria, in December. Any decision to cut production, he adds, will be made at that meeting after studying the state of oil markets at that time, since it's too soon to act, right now.
Al-Naimi also claims that most oil producing nations are "respecting their production quotas, since it's in everyone's interest to do so."
Al-Arabiya TV, however, says that, ironically, the bloc of nations known as "hawks" for their insistence on maintaining high oil prices, which include Iran, Venezuela, Nigeria and Libya, "have been among the worst overproducers" of the entire oil cartel.
Analysts say that Arab oil ministers met, separately, before the official OPEC meeting, in a bid to shore up ranks and to put pressure on those countries not respecting the current official quotas.
Saudi King Abdullah told the Kuwaiti daily As Siyassah, in an interview, Saturday, that he believes that $75 is a "fair price for a barrel of oil."
Qatar's Oil Minister Abdallah al-Attiyah also told reporters at Saturday's OPEC meeting that any price below $70 a barrel would cause a "freeze" on investment in the oil production sector.
He says that OPEC is waiting to see how the global economic crisis plays out before making a decision on production cuts, but that an oil price below the threshold of $70 to $80 a barrel will cause a freeze on investment and that no money will be put into new or existing wells, causing future production problems.
Analyst Louis Hobeika, who is Professor of Economics and Finance at Beirut's Notre Dame University, thinks that a production cut cannot really stem the fall in prices, anyway.
"This is really now a demand driven market, in the sense of suppliers cannot really do much to stop the decline in prices and therefore it's difficult for them," he said. "Of course, if they lower production by 5 million barrels a day, they will impact."
"However, they cannot afford it, because their budgets are based on very important, steady flows of income. So, on the one hand, they like to push prices up, on the other hand, they cannot really do it through a decrease in production, especially since they have tried it a few weeks ago, and it didn't work," he added.
Oil prices have tumbled more than 60 percent since their record highs last July, and even dipped below $50 a barrel, last week. Friday's closing price of $54 a barrel is a slight improvement for producers, but satisfies few at OPEC.
The oil cartel cut production by 1.5 million barrels a day at its last meeting on October 24 in Vienna, and seems to be hoping that producing nations adhere to those quotas before being making any move to cut production at the next meeting in Algeria on December 17.