MercoPress. South Atlantic News Agency

Oil prices forecasted to continue falling gently

Oil prices should continue to fall unless OPEC decides to cut production which is not certain, according a report from the Centre for Global Energy Studies, CGES made public Monday.

Now that prices have dropped 25% the big question is, "will they recover, will they remain in the range of 60 US dollars pb or will they continue to drop?, asks CGES.

"In the current situation a further drop can be expected unless OPEC somehow or other decides to cut production", underlies the CGES September report. But for OPEC to take action several factors must be taken into account.

Above all, OPEC which supplies 40% of the world's oil production, must decide the prices it's prepared to defend, 60 US dollars, 50 or even less". Beside OPEC would want to make sure that it is really urgent to act on the matter.

"Finally and most important, several OPEC members will have to share the production cuts with Saudi Arabia", the world's leading producer and head of the cartel, otherwise, the Saudis would have to act on their own.

For the Brent barrel to remain in the range of 60 US dollars in the coming northern hemisphere winter, OPEC (including Iraq), must cut production to 29.4 million bpd in the fourth quarter and to 29 million bpd in the first quarter of 2007, as against 29.97 million bpd last August.

This means cutting production by a million bpd in the coming six months, which could hardly be addressed only by Saudi Arabia, points out the CGES report.

The Saudis will make the most to reach a collective agreement inside OPEC to cut production but Venezuela, Iran, Iraq, Nigeria and Indonesia will be deft to the proposal, argues CGES. Besides, "forcing all other members to act could lead to a further contraction of prices, therefore the most viable option is for Saudi Arabia to let production decline gently", concludes the report.

OPEC is scheduled to meet next November in Nigeria but analysts don't discard an extraordinary summons if prices continue to drop.