15 Mar 2009
March 15 (Bloomberg) -- OPEC's biggest oil producer is pushing other members to comply with production cuts decided last year as the group meets today to confront prices below $50 a barrel and sagging demand."We would like to see compliance as high as possible," Ali al-Naimi, the oil minister for Saudi Arabia, told reporters as he arrived at his hotel yesterday in Vienna. "It is over 80 percent now, it can be better."
Saudi Arabia, which pumps more than twice as much oil as Iran, the Organization of Petroleum Exporting Countries' second- largest producer, is the only one of 12 members to cut more output than agreed last year. Iran and Nigeria have made good on only about half of their promised reductions, according to figures that OPEC released March 13. The group agreed to three cutbacks late last year totaling 4.2 million barrels a day.
Oil futures settled last week at $46.25 a barrel in New York. While prices have risen 3.7 percent this year, they are down more than $100 a barrel from July's peak as the worldwide recession saps demand. A further OPEC cut would raise prices and hold back the revival of the global economy, al-Naimi said in a story published in the Saudi-owned al-Hayat newspaper today.
"We will discuss with other OPEC members is they wish to cut or not and we will then decide in wake of a collective OPEC decision," he told the newspaper.
OPEC Secretary-General Abdalla El-Badri said today's decision could go "either way" as ministers gathered for breakfast before the start of the meeting.
Tightening Supplies
More cuts are unlikely because earlier moves have succeeded in tightening supplies, a delegate from one OPEC country told Bloomberg News yesterday. The group may instead meet again before its next scheduled September gathering, the delegate said, declining to be named because the decision is not final.
OPEC's monthly report, citing data from secondary sources such as include analysts and news agencies, showed varying adherence to quotas.
Saudi Arabia had reduced crude production to 7.89 million barrels a day in February, or 166,000 barrels a day less than its target, the report showed. Iran was pumping 277,000 barrels a day more than its quota, meaning it had completed only 51 percent of its promised reduction. Nigeria had completed 54 percent, Angola 15 percent and Kuwait 98 percent.
Venezuelan Oil Minister Rafael Ramirez said today that OPEC should focus on "strict compliance" with existing production cuts.
Algerian View
Algerian Energy Minister Chakib Khelil repeated his view that OPEC should further cut output and adhere to quotas.
"The market has already taken into account 500,000" barrels a day of additional OPEC cuts, he told reporters in Vienna yesterday. Prices will fall if the extra reduction is not made, he said.
Other ministers were less insistent, including Qatari Oil Minister Abdullah bin Hamad al-Attiyah, who said OPEC should adhere to existing cuts first before considering more.
The group already faces a 61 percent plunge in net oil revenue this year amid declining production and prices, according to the U.S. Energy Department. It estimates OPEC will earn $383 billion in 2009 from crude exports.
"OPEC should not think about cutting more until they meet their quotas," Francisco Blanch, head of global commodity research at Merrill Lynch & Co., said in a Bloomberg Television interview. "The last thing the global economy needs is a spike in oil prices."
Ministerial Monitoring
OPEC's Ministerial Monitoring Committee met yesterday in Vienna to examine compliance with existing cutbacks. The committee didn't recommend any course of action for the full OPEC meeting today, which began with a breakfast meeting at 8:30 a.m. Vienna time before the start closed-door meetings. The day will end with a press conference.
Nigerian Minister of Petroleum Rilwanu Lukman declined to comment on the committee's view, saying only that "we want a better price." Asked what he thought about compliance with existing quotas, he said: "It could be better."
World oil consumption is usually lowest after the end of the Northern Hemisphere's winter as heating oil use wanes. Demand is set to decline for a second consecutive year, the first back-to-back drop since 1983.
The Paris-based International Energy Agency and OPEC cut their 2009 forecasts for oil demand for a seventh month on March 13 and reduced supply estimates as the global economic slump saps consumption as well as investment in new fields. Both organizations see demand slumping more than 1 million barrels a day this year, to about 84.5 million barrels a day.
Analyst Survey
Earlier this month, when prices were lower, most analysts expected an OPEC cut. In a March 3-4 Bloomberg survey, 31 of 41 analysts said OPEC will curb output again, and the rest expected no change.
Now, "the probabilities are overwhelming that they will not cut," Edward Morse, an economist at New York-based LCM Commodities LLC, said in a March 13 Bloomberg television interview. "If oil prices were at $40 or in the $30 range, I think it would be a fairly high probability they'd cut. With prices above $40, flirting with $50, they have the economy on their minds."
Russian Deputy Prime Minister Igor Sechin, who is leading a delegation to OPEC's meeting in Vienna, said it "depends on the market" whether Russia will curb oil production this year.
OPEC Secretary General Abdalla El-Badri said on Feb. 9 he was "very disappointed" that non-OPEC producers including Russia had failed to help reduce excess supply in the oil market.
