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Oil producers set to cut output
Opec chief says "substantial" cut needed as demand drops due to economic crisis.
Last Modified: 18 Oct 2008 20:31
Opec is set to pump less crude as demand for oil drops due to the economic crisis [AFP]

The chief of the Organisation of the Petroleum Exporting Countries (Opec) has said that there must be a "substantial" cut in output when the group meets in Vienna next week.

"There will be a reduction in production at the next extraordinary meeting of Opec, and it will have to be a substantial one to get the balance right between supply and demand," Chakib Khelil, who is also Algeria's energy minister, said.

"If it has to be 1.5 million barrels per day, or two million barrels per day, that's what it will be."

The emergency meeting in the Austrian capital on October 24 will discuss the impact of economic weakness on oil markets.

Oil prices have dropped more than 50 per cent from July's record of $147.27 and expectations have grown that a global recession will further reduce demand.

Last week US crude was trading at around $72 a barrel.

Earlier on Saturday, Khelil was quoted in the Algerian El Watan newspaper as saying that Opec saw oil prices bottoming at $70-$90 per barrel.

"Normally, Opec has no price target. The market decides on prices. But people say that the bottom price, the bottom cost below which we can not step down, is between $70 and $90 per barrel," he said.

'Fair price'

The oil ministers of Qatar and Iran have also said that a balance between supply and demand must be found so that the oil price does not slip further.

"We are targeting a fair price," Abdullah al-Attiyah, Qatar's oil minister, said.

"In my personal opinion, we are talking about a target price today not more than $100 or $120, but between $80 and $90 as a benchmark within which prices could oscillate and be acceptable to consumers and producers at this time."

Gholamhossein Nozari, Iran's oil minister, said: "Balance should be established between oil demand and supply. In addition to stabilising the oil price, we intend to increase its price."

Economists say that Iran, the second largest Opec producer after Saudi Arabia, has become increasingly dependent on high oil prices, some saying it now needs $70 to $75 a barrel for its crude to balance its books.

Spending cuts

Kuwait, another Opec member, has warned that it will have to cut spending in its next budget if the price of its crude fell below $60 per barrel.

"The estimated budget of 19 billion dinar [$70.71bn] will not be affected, but the new budget could be affected depending on an increase or decrease of oil prices," Mustapha al-Shamali, Kuwait's finance minister, told al-Rai newspaper.

State news agency KUNA said Kuwait's crude oil fell to $59.15 on Thursday.

Nigeria has also been hit by the dramatic drop in world oil prices, prompting a revision in next year's budget, which is due to be debated in parliament next week.

Source:
Agencies
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Feedback Number of comments : 5
 
mike
United States
19/10/2008
cutting oil production
This is typical of the people that want to hold the world hostage so that they can force others to spend all their money on them. Nothing but a bunch of money greedy people who would rather see their own financial gains increase as other people struggle to make ends meet.

Steven
United States
19/10/2008
Cutting Oil Production
Now here is a great example of why the USA should invest, support, and encourage the development of wind, solar, and light water nuclear energy sources.

Brian
United States
19/10/2008
Mike, the people that have the oil have become use to getting more money for their product, in the US we have gotten oil for very cheap for a long time. You want to talk about greed, just look to the US corporations and the politicians that serve them.

Victor
United States
20/10/2008
The effects of reduced consumption
The oil consumers can see the effect of their wasteful ways. With a reduced oil consumption, the oil based economies of the countries that support the Islamic Jihadists that want to kill us and destroy our way of life. Having a gas guzzler partially pays for the funds of the Islamofascists and Al-Qaeda. Lets support alternative fuel.

Al
United States
20/10/2008
Oil producers to cut output
Plenty of people in the US blame OPEC for high oil prices, while failing to note that US oil producers ( We are the number 3 producer in the world behind the Saudis and Russia) charge the same prices as OPEC. It's a business, and oil is a fungible asset. If OPEC is holding us as a hostage, then Chevron and Exxon are too.