The Organization of Petroleum Exporting Countries (OPEC) may decide to cut its oil output quota as the price of crude risks falling under $100 a barrel, energy consultancy CGES reported.
An Iranian official from OPEC said, over the weekend, that the group is considering leaving oil production levels unchanged, or perhaps even trimming them to shore up flagging prices and defend market share. “The market is oversupplied by at least 1 million barrels a day. If OPEC would like to remove this additional oil out of the market, then OPEC has to cut some production,” said OPEC Governor Mohammad Ali Khatibi.
In Iraq crude production was already down by 30,000, in July, to 2.46 million barrels per day (bpd).
Director of Oil at Platts, John Kingston, said: “It’s notable that suddenly, with output rising, OPEC officials are concerned about adherence to quotas and oversupply.”
The weekly average oil prices of the OPEC dropped to $109.73 per barrel last week.
The prices have dropped for six consecutive trading weeks, by a total of $28.58, after prices reached $138.31 in the first week of July.
OPEC said in its monthly report, released last Friday, that the eased geopolitical tensions in Georgia and concerns over slower demand growth amid weak economic signs were the main causes for the steep fall. Other factors included a steep drop in oil demand in countries of the Organization for Economic Cooperation and Development (OECD), the United States in particular, as well as a rebound of the US dollar, the group said.
“The worsening economic outlook suggests that oil prices have further to fall, but OPEC, whose members are due to meet in early September, may act to prevent them from falling too far,” the Centre for Global Energy Studies said in its latest monthly report. The London-based consultancy also aired growing fears that OPEC may “over-react” by cutting its production too sharply and sending oil prices back up again.
OPEC's latest estimate trims 2008 demand growth by 30,000 bpd, its fifth consecutive month of declining forecasted demand. The group now estimates global oil demand this year will average 86.9 million bpd. It predicts that demand will inch up to 87.8 million bpd in 2009.
Simultaneously, the revised forecast sees oil demand from OPEC's members slipping to 32.1 million bpd, which works out at 100,000 bpd less than in 2007. The 2009 forecast extends the trend, with demand for OPEC oil easing to an average of 31.3 million bpd. The group has attributed the drop to slowing demand growth and oil coming into the market from newly developed fields in non-OPEC nations.
OPEC claims it has bumped up output to help calm the volatile oil market, pumping 32.64 million bpd in July, a figure that stands at 780,000 bpd more than in April. The group's monthly report also said OPEC is now producing: “well above the demand for its crude.” The report makes speculation, that the group may cut back on production, increasingly likely.
