MercoPress. South Atlantic News Agency

OPEC divided over a formal cut of oil output

Oil prices settled above 60 US dollars a barrel Thursday on expectations that OPEC would soon cut its output in “a million barrels per day”, though much will depend on what attitude Saudi Arabia adopts.

Concerns also grew about the stability of world oil supplies amid violence in Nigeria and as the United Nations consider possible sanctions against Iran over its nuclear program.

The president of the Organization of Petroleum Exporting Countries, Edmund Daukoru, did not confirm or deny reports attributed to anonymous sources from member countries who said the cartel plans to trim its daily production by 1 million barrels.

In Washington US Energy Secretary Sam Bodman said that he would urge OPEC to reconsider the decision, "we still need oil for sure. We still need all the oil we can get".

OPEC "basket" price, an average of the different crude blends sold by OPEC members has fallen since mid July from 72 to 54 US dollars per barrel, costing the cartel's ten members about 500 million US dollars a day in lost income.

Oil prices initially jumped by more than one US dollar a barrel amid the uncertainty, then eased back as traders said they doubted whether all OPEC members would go ahead with any informal agreement intended to stem the 24% decline since mid-July.

Daukoru, who is also Nigeria's oil minister, said the group was considering holding an emergency meeting before its scheduled December 14 conference, but any formal position on oil cuts would be agreed after consultations.

"We each have an idea of what is an appropriate response ? we agree that something needs to be done," Daukoru said, referring to possible cuts in output. "We will have to agree on how much, how soon and how we distribute it among the member countries."

However Algerian media reported that an emergency meeting of the cartel would take place at its Vienna headquarters on October 18. But Saudi Arabia's position is key to success of any attempt by OPEC to bolster the crude price by reining in production.

Demand for Saudi crude and other Gulf blends has dropped sharply owing to an abundance of stocks in the US. Warm weather in the northern hemisphere is slowing the build-up in demand for fuel oil.

So far oil industry sources indicate that six OPEC members, Saudi Arabia, Algeria, Venezuela, Nigeria, Libya and Kuwait have begun "voluntary" cuts, but no volumes have been specified. Saudi Aramco, the state oil company, is believed to have reduced output by 200,000 bpd over the summer.

Saudi Arabia is torn between the short-term need to support prices and incomes and the long-term requirement to keep OPEC product competitive in relation to non-OPEC producers and the increasing investment in alternative fuels.

During September OPEC members pumped an average 29.45 million bpd according to industry estimates.