Oil markets should be preparing themselves for an upcoming decision on output quotas at the Organisation of Petroleum Exporting Countries' (OPEC) next scheduled meeting, said the producer-cartel's President Chakib Khelil.
Mr Khelil, who also moonlights as Algeria's Energy Minister, said on Saturday that the impending reduction may be more "severe" than widely expected. Analysts have speculated that the yet-to-be-rubber-stamped figure may be by around 2 million barrels per day (bpd).
How the news translates to the petrol station forecourt is simple. Lower prices enjoyed following the sharp fall in prices on the world market will soon be at an end; with prices beginning to creep back upwards once again at the turn of the year.
OPEC member nations are set to meet at a time when prices sit near the bottom of a long slide from their $147, July 11, high. As at the close of business on the New York Mercantile Exchange (NYMEX), on Friday, the U.S.'s main futures contract stood at $40.81 – its lowest price for some 4 years.
The fear is that if oil continues to plummet at their current rate there will be an economic backlash across numerous oil-rich nations, a move that would only perpetuate the global economic crisis ever further. If the price of oil drops below production costs, then the effected nations will in turn be forced to cut their own overseas investments.
OPEC has been stalling over its decision to adjust quota levels, blaming the time that it took for previous cuts to be fully implemented to fully take effect. Even at the organisation's EGM last month, the representative ministers were still awaiting for the 1.5 million bpd cuts made in October to have been complied with by all member nations.
The cartel is expected to make its next quota cut announcement at its upcoming Summit, in Oran, Algeria, on December 17.
Any further cuts are likely to be significantly more impacting; a decision that would potentially startle markets, subsequently helping to arrest falling prices. “The best way is to surprise them,” said Khelil. “The stronger the decision, the faster prices will pick up,” he added.
In search of unity across the board, OPEC's influential leader has urged producer-nations outside of the cartel to regulate their own prices. This notion is directed at Russia, who has previously said that it would consider signing a cooperation memorandum with the cartel at this month's summit.
Mr. Khelil, said: “We hope that Russia will apply [quota decisions]… as if it were an OPEC member.”