Oil producers mull further cuts
Opec members meet in Vienna to discuss how to push up crude oil prices.
However, some producers have still not fully complied with the cuts agreed last year.
Compliance debate
Ali Ibrahim al-Nuaimi, Saudi Arabia’s oil minister, has said that there was only an 80 per cent compliance level with those cuts – meaning that Opec still has yet to remove about 800,000 barrels per day of production from the market.
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“If the price is too low the producers … will be in a dire economic situation, they will not be buying good and services” Manouchehr Takin, |
“The debate among ministers is should they wait until all the members of Opec reduce further … and see what happens to the market,” Manouchehr Takin, a senior policy analyst at the Global Energy Studies Centre in London, said.
“Others say … in addition to fully implementing the decision made before they should also decide to cut further because the state of the global economy is very poor,” he told Al Jazeera.
Saudi Arabia and other Gulf states were thought to favour full compliance with present quotas through ending overproduction instead of lowered targets.
The worldwide recession and accompanying credit crunch has dragged oil prices far below the record highs of more than $147 per barrel in July. In turn, that has slashed government incomes in Opec nations.
“If the price is too low the producers … will be in a dire economic situation, they will not be buying good and services,” Takin said.
“The oil companies will not invest in developing oil fields and in three or four years time we will have a shortage of oil.”
Depressing demand
While slashing production could raise prices in the short term, it could also lead to further depressing of demand, as struggling economies cut back on expensive crude.
Khelil said that Opec wanted to achieve a target oil price of $80 per barrel.
In a move that could help bolster crude prices for Opec nations, Russia, which is not a member of the bloc, on Sunday told Opec delegates that it would cut exports while increasing domestic consumption.
Igor Sechin, Russia’s deputy prime minister, said Russian oil production had already decreased by 1.9 per cent in the first two months of 2009.
Russia is the world’s second largest producer of crude after Saudi Arabia.