OPEC may meet in August to cut oil production again
Members of the Organization of Petroleum Exporting Countries are considering a possible meeting in early August that could result in the group's third production cut this year to boost sagging oil prices.
By the OGJ Online Staff
HOUSTON, July 23 -- Members of the Organization of Petroleum Exporting Countries are considering a possible meeting in early August that could result in the group's third production cut this year to boost sagging oil prices.
OPEC Sec. Gen. Alí Rodríguez Araque confirmed Monday he is consulting with energy ministers of all member countries about an extraordinary meeting in early August that could result in another reduction of the group's production. Several ministers agreed that a reduction is needed, but there are no specific figures as yet, he said.
Ali al-Naimi, Saudi Arabia's oil minister and a power in OPEC, Saturday told reporters in Bonn, Germany, that OPEC members are discussing a reduction of another 1-1.5 million b/d, or 4%-6% of the group's current production, effective Sept. 1. OPEC members previously agreed to production cuts of 1.5 million b/d in January and 1 million b/d in April to an official total of 24.2 million b/d.
Al-Naimi earlier told reporters in Bonn, "All the sources of information are leading us to believe that we are heading toward a crisis, that demand (for oil) is diminishing, supply is excessive, and therefore if OPEC needs to maintain its price band, it should take drastic action to cut production." However, he said, "We want to be sure that if we do that, we don't create another crisis."
At meetings in June and July, OPEC members rejected pleas from US officials to increase production to reduce oil prices that were hovering near the top of the group's targeted band of $22-$28/bbl. Prices have since sagged near the lower end of that band in the face of strong US inventories of oil and refined products and a weaker demand for gasoline during the US driving season.
Last week, the price for OPEC's basket of seven crudes fell by more than $1 to an average of $23.07/bbl for the full week. That compares to averages of $26.10/bbl for all of June and $26.25/bbl for May. So far this year, OPEC's basket price has averaged $24.88/bbl, near the midpoint of its targeted price band. That's well below an average $27.60/bbl for all of 2000, but up from $17.47/bbl in 1999.
Moreover, analysts said, the world oil market usually picks up in winter months with increased demand for heating oil. Some said that a decrease in world oil production could tighten heating oil supplies and create a price spike.
"There are many uncertainties in the market right now, including the present world economic performance, as well as supply and demand projections," Rodríguez Araque said Monday. "OPEC is taking a much more proactive role in monitoring market developments and we feel there might be a need to meet ahead of our ordinary meeting."
OPEC's next regular meeting is scheduled for Sept. 26 in Vienna.