MercoPress. South Atlantic News Agency

OPEC divided over quota compliance and further cuts

OPEC energy ministers decided on Saturday to leave oil production quotas unchanged after talks in the Egyptian capital following falls in the price of oil. OPEC President Chakib Khelil said any such decision would be made at a meeting in Algeria next month.

The price of a barrel of oil has tumbled to below 55 US dollar after peaking at a record 147 in mid-July. OPEC members have lost billions of dollars as demand has dropped in the face of the global economic downturn. The price of OPEC basket of thirteen-crude stood at 47.38 USD a barrel on Thursday 27/11/08, compared with 45.47 the previous day, according to OPEC Secretariat calculations. Opec member Iran and Venezuela favour a cut in output of a million barrels a day to try to boost prices. But several OPEC ministers had already dampened expectations that a cut in production would be announced this weekend. After Saturday's meeting, OPEC President Chakib Khelil said ministers had agreed "to take any additional action on 17 December to balance oil supply and demand". OPEC, which accounts for 40% of global oil production, cut output by 1.5 million barrels a day last month (plus half a million bpd before), but the move failed to stop prices from declining. While cartel members have not ruled out making another output cut, some say the impact of the existing cuts still have to be felt. Gulf and Saudi Arabia want to see strict compliance with recent output curbs of 2 million barrels a day before considering further reductions when OPEC meets in Algeria. "Compliance I think is OK," said Kuwaiti Oil Minister Mohammad al-Olaim. "But the market conditions require us to be 100 percent compliant." Delegates said that ministers discussed how much more they needed to cut in December. Most, including Gulf producers led by Saudi Arabia saw a requirement to slice another 1 to 1.5 million bpd. But for that to happen, delegates said, Riyadh wants proof that all fellow members are meeting their part of existing curbs. "We are very concerned about overproduction," said Qatari Oil Minister Abdullah al-Attiyah. While OPEC's first priority is to put a floor under a 90 USD collapse in oil prices to 55 USD, Saudi Arabia for the first time in years identified a "fair" price – 75 USD a barrel. That target will serve as a reference point for traders when world oil demand starts to emerge from the current recessionary slump. Iranian state TV said the country's Oil Ministry has proposed an OPEC production cut of two million barrels per day. Oil Minister Gholam Hossein Nozari was quoted as saying Sunday that the market was oversupplied by around two million barrels per day and that production should be cut by that amount.