OPEC ministers will take further steps to prop up the oil market and could call another meeting before the group’s next scheduled talks in December.
In response to a nearly 60 percent fall in oil prices from a record of $147.27 hit in July, the Organization of the Petroleum Exporting Countries agreed at an emergency meeting last week to cut production by 1.5 million barrels per day (bpd).
OPEC Secretary General Abdullah al-Badri said if prices continued to fall, OPEC would call another extra meeting.
“If circumstances dictate we have to have another meeting, we will have a meeting before the Algerian meeting,” al-Badri said on the sidelines of a conference in London.
Attending the same conference, Libya’s most senior oil official Shokri Ghanem said OPEC could need to reduce output further.
“Talking about the recent cut, we have to wait to see how the market behaves in the coming weeks … If the price continues to deteriorate, it’s going to affect everything,” Ghanem said.
Last week’s emergency OPEC meeting in Vienna was swift to reach agreement on the need for an output cut. OPEC’s President Chakib Khelil of Algeria said the group — which has often been accused of disunity in the past — had stood firm.
“All the countries agreed (in the meeting). There were no discussions, no conflict, not with Saudi Arabia or with Venezuela,” Khelil was quoted as saying in Algerian newspaper Liberte.
“Either the market believes us and the prices stabilise. Or it doesn’t, and then we’ll have to do things so that the market believes we are serious.”
Oil prices were slow to react to OPEC’s decision as traders focused on the prospect economic slowdown would erode demand and were sceptical OPEC would really cut supplies.
On Monday, U.S. crude touched a 17-month low of $61.30, but it recovered to above $64 a barrel on Tuesday.
In the first concrete evidence OPEC was acting on its output decision, Abu Dhabi National Oil Co (ADNOC) said on Tuesday it had notified customers it was cutting contracted volumes for its crude by between 5 and 15 percent.
Kuwait’s Oil Minister Mohammad al-Olaim placed the emphasis on the supply and demand situation. He said OPEC would monitor the market closely and would act to prevent a build up of surplus stocks.
“When OPEC takes a decision to reduce output it is because the market does not need it (the oil),” he told reporters in Kuwait when asked if OPEC could cut output again if oil prices continued to decline.
“OPEC does not interfere in setting the price but what sets the price is the mechanism of the market…. OPEC always seeks to stabilise the market and availability of the product,” he said further.
OPEC ministers have repeatedly said that too low an oil price is ultimately counter-productive even for consumer countries as it limits investment in bringing on new supplies and will eventually drive oil markets higher again.
Nobuo Tanaka, executive director of the International Energy Agency, often regarded as a representative of consumer interests, added his voice to concerns about project delays.
“If the price of oil is too low? Yes, we are concerned about it,” Tanaka told Reuters in London.
(AFX & Rigzone)