Business | Oil & Gas
Opec production cutbacks likely to be just a question of time
Oil's rapid descent to $60 is ringing alarm bells in many Opec countries and the question now is when, not if, the producer group will cut supplies.
- Reuters
- Published: 00:00 September 22, 2006
London: Oil's rapid descent to $60 is ringing alarm bells in many Opec countries and the question now is when, not if, the producer group will cut supplies.
Prices have fallen $5 a barrel since the Organisation of Petroleum Exporting Countries agreed on September 11 to hold output steady despite a sharp drop from a mid-July peak of $78.40.
Ministers voiced concern then, with US crude oil at $66, about the speed of the decline and raised the prospect of braking production before the end of the year.
Noticeable for his reticence was Saudi Oil Minister Ali Al Naimi, who steers the policy of the world's biggest exporter.
But he broke his silence on Tuesday, saying that oil then around $62 a barrel was at a reasonable price for producers and consumers.
"We're all trying to read the tea leaves now," said Mike Wittner of Calyon investment bank.
"If prices are 'reasonable', it's a carefully ambiguous remark that tells you little, because 'unreasonable' could be 50 cents lower or it could be $5 lower."
"Our view is that the Saudis will start to trim quietly if US crude gets below $60," said Wittner.
"But the deciding factor will be whether prices are headed down to a sensitive area with momentum."
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