Opec President Chakib Khelil said yesterday the oil group was reluctant to cut production, despite falling prices, before any U.S. military action that could drive prices upwards again.
"Our objective is to make sure that we don't enhance any price increase that could result from the attack if there will be one," Khelil said in Rome during a week-long visit to Italy.

"We don't want to make a decision just before that happens," he added in an interview. Oil prices have slumped by about 20 per cent since the September 11 attacks on the United States on gloom about prospects for global economic growth.

The United States and its allies tightened plans for an expected strike on Afghanistan yesterday, putting troops on alert and explaining its intentions to key countries in the region.
"Military action could have a big impact on prices. Prices will definitely increase. We don't know how much they will increase," Khelil said.

"Our objective is to stabilise the prices," he added. Khalil's remarks echoed comments by Saudi Oil Minister Ali bin Ibrahim Al Naimi, quoted in the Financial Times yesterday as saying Opec would probably not reduce production because the oil group was seeking stability in the market.

Khelil said oil markets needed time to absorb Opec's three output cuts so far this year totalling 3.5 million barrels per day (bpd), the last of which for one million bpd took effect on September 1.

The Opec president said that he had started consulting various Opec ministers, as well as non-Opec producers Russia and Mexico, to discuss how to respond to falling oil prices. Opec represents 30-35 per cent of global oil output.

"We are discussing the uncertainty of the timing (of a possible strike)," Khelil said. "The consultation is to develop scenarios and possible positions on what Opec can do." The Opec president added, "The consultation will probably drag on until we see some (military) action and the impact."

Opec's oil basket price has now spent eight consecutive days below the group's $22-28 target range, but ministers have held off against further supply curbs due to the heightened uncertainty.

Under an Opec price stability mechanism, if the basket stays below $22 for 10 consecutive days, Opec can instigate a 500,000 bpd supply cut to try and bring the price back into the $22-28 band.

Khelil said discipline by Opec members in adhering to recent output cuts would reduce oversupply and support prices. "If we had more discipline than we have had in the last, let's say, three months, it would be equivalent to a production cut," he said.