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11-14-2008, 10:56 AM
By Grant Smith and Mark Shenk
Nov. 14 (Bloomberg) -- OPEC, supplier of more than 40 percent of the world's oil, will probably announce plans to lower supply for the third time in as many months to prevent prices plunging toward $50 a barrel, a Bloomberg survey showed.
The Organization of Petroleum Exporting Countries will cut output at a meeting in Cairo on Nov. 29, according to 17 of 18 analysts surveyed by Bloomberg. Fourteen of the analysts predict the reduction will be 1 million barrels a day or more.
``Given the rapid deterioration in the flow of economic data, and implications for further oil demand weakness, OPEC might have to cut by at least an extra 1 million barrels in order to catch the market's attention,'' said Harry Tchilinguirian, senior oil analyst at BNP Paribas SA in London.
The Cairo summit, originally intended for only the group's Arab members, was upgraded to a full OPEC meeting yesterday as oil prices dropped to a 21-month low.
Ministers from Algeria and Iran have said that production may have to be cut. The group announced a reduction of 1.5 million barrels a day on Oct. 24, on top of an earlier resolution in September to pare excess supplies by observing official output quotas.
`No Effect'
``In order to strengthen prices, OPEC is very likely to recommend another production cut as the two previous ones had no effect,'' Iran's OPEC governor Mohammad Ali Khatibi told the Mehr News agency in Tehran today. ``The market is in turmoil.''
OPEC President and Algerian Oil Minister Chakib Khelil told reporters in Algiers on Nov. 8 that an output reduction may be necessary. After Cairo, the group's next scheduled conference is in Oran, Algeria, on Dec. 17.
Oil futures in New York fell to $54.67 a barrel yesterday, the lowest since Jan. 30, 2007, and more than $90 below the record of $147.27 touched on July 11. Crude for December delivery traded at $56.44 as of 12:02 p.m. local time today.
``Saudi Arabia, the UAE, and Kuwait might be happy with lower prices to help the global economy but will probably go along with an agreement for the sake of OPEC unity,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut.
``I expect there will be another production cut announced in Cairo unless we have a massive rally before then,'' Beutel said.
OPEC is still in the process of implementing supply restrictions announced at its September and October summits.
Monthly Output
Eleven members subject to output quotas collectively pumped 29.095 million barrels a day last month, according to Bloomberg estimates, compared with an official ceiling of 28.8 million barrels a day.
The group will need to scale back production by about 1.2 million barrels a day to complete output cuts implied since September, industry consultant Oil Movements said yesterday. OPEC's current target, which took effect Nov. 1, is 27.3 million barrels a day.
Predictions by analysts expecting OPEC to cut this month range between 500,000 barrels a day and 3 million barrels a day. The one analyst who doesn't expect an output reduction in Cairo said the group may signal at the meeting that it will reduce production in December.
Others said the producer group needs to adopt a degree of caution given the slowing global economy.
``To retain credibility, they're going to have to go for 1 million barrels a day'' in Cairo, said John Hall, managing director of London-based consultants John Hall Associates Ltd. ``It'll send a message, but OPEC has to recognize the world is moving into recession, and it was high oil prices that set off the initial recessionary move this year.''
To contact the reporters on this story: Mark Shenk in New York at [email protected]; Grant Smith in London at [email protected]
Last Updated: November 14, 2008 12:15 EST
Nov. 14 (Bloomberg) -- OPEC, supplier of more than 40 percent of the world's oil, will probably announce plans to lower supply for the third time in as many months to prevent prices plunging toward $50 a barrel, a Bloomberg survey showed.
The Organization of Petroleum Exporting Countries will cut output at a meeting in Cairo on Nov. 29, according to 17 of 18 analysts surveyed by Bloomberg. Fourteen of the analysts predict the reduction will be 1 million barrels a day or more.
``Given the rapid deterioration in the flow of economic data, and implications for further oil demand weakness, OPEC might have to cut by at least an extra 1 million barrels in order to catch the market's attention,'' said Harry Tchilinguirian, senior oil analyst at BNP Paribas SA in London.
The Cairo summit, originally intended for only the group's Arab members, was upgraded to a full OPEC meeting yesterday as oil prices dropped to a 21-month low.
Ministers from Algeria and Iran have said that production may have to be cut. The group announced a reduction of 1.5 million barrels a day on Oct. 24, on top of an earlier resolution in September to pare excess supplies by observing official output quotas.
`No Effect'
``In order to strengthen prices, OPEC is very likely to recommend another production cut as the two previous ones had no effect,'' Iran's OPEC governor Mohammad Ali Khatibi told the Mehr News agency in Tehran today. ``The market is in turmoil.''
OPEC President and Algerian Oil Minister Chakib Khelil told reporters in Algiers on Nov. 8 that an output reduction may be necessary. After Cairo, the group's next scheduled conference is in Oran, Algeria, on Dec. 17.
Oil futures in New York fell to $54.67 a barrel yesterday, the lowest since Jan. 30, 2007, and more than $90 below the record of $147.27 touched on July 11. Crude for December delivery traded at $56.44 as of 12:02 p.m. local time today.
``Saudi Arabia, the UAE, and Kuwait might be happy with lower prices to help the global economy but will probably go along with an agreement for the sake of OPEC unity,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut.
``I expect there will be another production cut announced in Cairo unless we have a massive rally before then,'' Beutel said.
OPEC is still in the process of implementing supply restrictions announced at its September and October summits.
Monthly Output
Eleven members subject to output quotas collectively pumped 29.095 million barrels a day last month, according to Bloomberg estimates, compared with an official ceiling of 28.8 million barrels a day.
The group will need to scale back production by about 1.2 million barrels a day to complete output cuts implied since September, industry consultant Oil Movements said yesterday. OPEC's current target, which took effect Nov. 1, is 27.3 million barrels a day.
Predictions by analysts expecting OPEC to cut this month range between 500,000 barrels a day and 3 million barrels a day. The one analyst who doesn't expect an output reduction in Cairo said the group may signal at the meeting that it will reduce production in December.
Others said the producer group needs to adopt a degree of caution given the slowing global economy.
``To retain credibility, they're going to have to go for 1 million barrels a day'' in Cairo, said John Hall, managing director of London-based consultants John Hall Associates Ltd. ``It'll send a message, but OPEC has to recognize the world is moving into recession, and it was high oil prices that set off the initial recessionary move this year.''
To contact the reporters on this story: Mark Shenk in New York at [email protected]; Grant Smith in London at [email protected]
Last Updated: November 14, 2008 12:15 EST