David Young
OGJ Online
LONDON, Oct. 8 -- The Organization of Petroleum Exporting Countries may announce oil production quota reductions late this week or early next week, a spokesman said Monday.
Sec. Gen. Ali Rodriguez held a series of phone conversations with representatives of member states Saudi Arabia, Iran, and Algeria, and with nonmember Mexico.
The OPEC spokesman said that immediate production cuts cannot been ruled out, but it is more likely that the organization will wait "2 or 3 days" to assess the impact on the oil markets of the US and British military strikes against Afghanistan.
OPEC's next scheduled meeting is Nov. 14 in Vienna, but it is likely to decide on production levels before then.
The spokesman said, "The strikes appear to have helped the market slightly, but we can see cuts of 500,000 b/d later this week or early next week."
The basket of OPEC crudes fell below the organization's $22/bbl price floor on Friday, according to official figures released Monday. OPEC officials can order immediate production cuts of 500,000 b/d to move the price back into the target $22-28 price band. The basket price is calculated retrospectively after the markets close, and NYMEX closing prices on Monday could trigger an output change.
Traders Monday suggested that the market has discounted attacks on Afghanistan as price drivers, although any spreading of military activity or massive protests in Persian Gulf nations would concentrate attention very quickly. Afghanistan does not export oil or control any shipping or pipeline routes.
The opening price of crude Monday was hardly changed from Friday with US benchmark front-month West Texas Intermediate rising 46� to $22.85/bbl before dropping back to around $22.60 in early trading. On the International Petroleum Exchange in London, Brent futures were 40� higher in early trade but volumes were low. By early afternoon gains were slight, with the contract trading 22� up at $21.85.
Markets have been falling since early summer and prices are 20% of the level before Sept. 11, due more to fears of recession than of output interruptions.
In Indonesia, general threats from the small but vocal radical Islamic Defenders Front prompted ExxonMobil Corp., BP PLC, and Devon Energy Corp., to close their Jakarta offices, but they maintained offshore and onshore field operations. The Indonesian government sent a letter to all contractors asking them to keep their offices open and to operate normally.
Throughout Europe security has been heightened at offshore and onshore oil installations and at refineries, but the UK government would not comment on specific security measures.
Statoil said that travel restrictions it placed on its employees Sept. 20 will be maintained. It has halted travel to Afghanistan, Iraq, Libya, and Pakistan.
Contact David Young at [email protected]