The Times: Opec will come under pressure tomorrow to cut production for the second time in as many months.
Ian King, Deputy Business Editor
Opec will come under pressure tomorrow to cut production for the second time in as many months.
The 13-nation cartel of oil producing countries meets in a hastily convened session in Cairo ahead of its scheduled meeting in Oran, Algeria on December 17. However, a number of Opec members, led by the second-and fifth-biggest, Iran and Venezuela, are pushing for more production cuts before then.
Both Iran and Venezuela are dependent on oil prices being nearer $100 a barrel in order to balance their budgets and have been concerned at the way the continued fall in prices has eaten into their income.
Prices fell again yesterday after the publication of figures late on Wednesday pointing to another rise in US crude oil supplies. Inventories rose for the ninth consecutive week – the longest such run since April 2005.
Brent crude fell by almost 4 per cent at one stage yesterday, dropping to as low as $51.98 a barrel, while US crude prices also fell. Sentiment was further rattled by news that, during the past four weeks, demand for oil from the US has been almost 7 per cent lower than in the same period last year.
Venezuela and Iran are calling for a production cut of one million barrels a day by the cartel, which accounts for two in five of every barrels produced worldwide. They want Opec to target a price range of $80 to $100 for crude.
Their ambitions were boosted after President Medvedev of Russia, speaking after a meeting in Caracas with President Chávez of Venezuela to discuss the situation, said that Russia would act with Opec to promote market stability.
The visit was the first by a Russian leader in 150 years of Russian-Venezuelan ties, and saw the two nations sign an agreement to promote cooperation between Gazprom and Petróleos de Venezuela.
Mr Medvedev said: “Of course we are concerned about oil prices. These prices cannot be too low, nor can they be speculatively high. We are ready for discussions and coordination on the oil market with Opec countries.”
Rafael RamÍrez, Venezuela’s Oil Minister, added: “If an additional output cut is not enough, we will continue to cut until prices stabilise.”
Russia, along with Norway and Mexico – the world’s other major oil producers to remain outside Opec – has not acted in tandem with the cartel for almost seven years.
But Mike Wittner, global head of oil research at Société Générale, the French bank, said that he expected a production cut after the Algeria meeting next month, not this weekend. “Prices have held steady this week, so there’s no rush to go in and do it.”
Even if they are unsuccessful on this occasion, Venezuela and Iran are likely to keep up the pressure for production cuts. President Ahmadinejad of Iran is expected to run for reelection next year against the backdrop of 30 per cent inflation, while Mr Chávez faces a tricky series of local elections.
Fatih Birol, chief economist of the International Energy Agency, forecast yesterday that global demand for oil would rebound in 2010-11, possibly sending prices beyond the peak of $147 a barrel seen this July.
Mr Birol told a seminar in Warsaw: “Demand will eventually rebound in 2010-11. We may see prices going even higher than we saw this summer. There is still a lot of demand from countries such as India or China.” TNK-BP, Russia’s third-largest oil producer, which is half-owned by BP, is cutting downstream business staff at its head office and has said that it expects oil production to suffer if prices do not recover next year.