Saudi oil minister says new cut may not be needed
December 1, 2008 - OPEC sent out mixed signals about a possible future supply cut after its November 29 talks in the Egyptian capital ended with no changes to official output levels.
Saudi Arabian oil minister Ali Naimi said he saw no need for a further cut at OPEC's next meeting on December 17 in Oran, Algeria, if the oil producer group managed to achieve 80% compliance with its existing 1.5 million b/d reduction by then and if consumer stocks fell to 52-53 days of forward cover from the current 56.
But OPEC secretary general Abdalla el-Badri appeared to give more weight to the likelihood of an additional output cut in December, saying ministers had agreed on the need for "major" action in Algeria and that the group was "geared up" for a new supply cut if the oil market deteriorated.
Any likelihood of the Cairo meeting resulting in any output changes diminished when Saudi Arabia's Naimi said the event would do no more than "take stock and understand what is happening in the oil market."
Announcing the decision to leave official output levels unchanged at 27.308 million b/d, OPEC president Chakib Khelil said global oil demand was now expected to be much lower than forecast a month before, thanks to the contued deterioration of the global economy.
He said members were complying with an existing 1.5 million b/d which came into effect at the beginning of November and that ministers had agreed to take any additional action that might be needed to balance and stabilize the market when they next meet on December 17 in Oran, western Algeria.
The meeting was notable for the fact that Saudi Arabia, the world's most powerful producer, gave a glimpse into what it believes to be a "fair" price for oil.
Saudi Arabia's King Abdullah and oil minister Ali Naimi both said they thought a price of $75/barrel--more than $20/b higher than current levels--was a "fair" price, Naimi saying it was the kind of level which could guarantee continued investment in new capacity and therefore safeguard future supply.
King Abdullah told Kuwait's al-Seyassah newspaper that the recent slide in oil prices to less than $50/b had affected the foreign revenues of the
world's biggest oil exporter, although the country's budget was not based on the record prices seen earlier this year.
OPEC secretary general Abdalla el-Badri, speaking immediately after the Cairo talks, said an oil price of at least $75/b would give producers sufficient
income and help maintain investment in energy projects.
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