Saudi Arabia, the world"s largest oil exporter, said it will take the lead among OPEC oil producers in trying to halt a six-month slide in prices.
Saudi Arabia, the world"s largest oil exporter, said it will take the lead among OPEC oil producers in trying to halt a six-month slide in prices. Ali al-Naimi, the kingdom"s oil minister, said Saudi Arabia"s crude production in February will be ?lower than the target? set by the Organization of Petroleum Exporting Countries. The pledge follows supply reductions that started in November and this month that have failed to arrest a 71 percent decline in prices from July"s record, as a slowing world economy eats into demand for oil.
?We are working hard to bring the market in balance,? al- Naimi said as he arrived at his hotel in New Delhi today. ?We will do what it takes to bring the market in balance.?
The kingdom is currently producing 8 million barrels a day, the minister said, declining to say how much lower February"s level will be. OPEC agreed at its Dec. 17 meeting in Oran, Algeria, to reduce production targets for 11 members that have quotas, excluding Iraq, to 24.845 million barrels a day.
Saudi Arabia, OPEC"s de facto leader, had its target cut 5.1 percent to 8.051 million barrels a day, starting this year. Its daily production averaged 8.4 million barrels in December, according to Bloomberg estimates.
?It"s political, it"s trying to put pressure on others who are not complying so well,? said Leo Drollas, deputy director of the Centre for Global Energy Studies, a London-based consulting company. ?All announcements like this give some traders a reason to buy.?
OPEC needs to make the deepest supply cuts in its history to comply with the new target that started Jan. 1. Collectively, 11 OPEC nations produced an average of 27.45 million barrels a day last month, according to Bloomberg estimates, or 2.6 million barrels a day more than the new ceiling.
February Brent crude futures rose as much as 1.5 percent to $43.35 a barrel on London"s ICE Futures Europe exchange after al- Naimi spoke, before paring gains to trade at $43.18.
Crude for February delivery on the New York Mercantile Exchange was down 86 cents, or 2.3 percent, at $36.73 a barrel at 1:19 p.m. London time, on speculation falling demand caused U.S. crude inventories to accumulate.
Saudi Arabia had ignored its OPEC quota last summer to stem soaring prices. It decided to unilaterally raise output by 500,000 barrels a day during June and July as investors bought into commodities as a hedge against a weakening dollar and falling equity markets. Record fuel prices caused some consumers such as trans-Atlantic carrier Zoom Airlines, based in Ottawa and London, to declare bankruptcy.
As the economy worsened and prices began to fall after August, the country led efforts to rein back production, and agreed to lower its surplus production and to two group-wide production reductions, the latest of which took effect this month.
OPEC member Qatar, which is currently producing 735,000 barrels a day of oil, will lower production to meet its 730,000 barrel-a-day quota next month, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said in New Delhi today.
OPEC, which supplies more than 40 percent of the world"s oil and met every month from September to December in an attempt to stem the plummeting oil price, doesn"t plan to hold an emergency meeting before its scheduled gathering in Vienna in March, al- Attiyah said.
Early Meeting Unlikely
?So far I don"t think so,? he told reporters as he arrived at his hotel. ?We are only starting our new cut. February is a testing month - we will see in February how this cut is impacting the market.?
Oil futures in New York for the nearest monthly delivery contract have fallen 61 percent from a year ago, and yesterday closed at $37.59 a barrel, the lowest settlement since Dec. 24. Contracts for delivery later this year, in December, are more than 50 percent higher, a market situation known as contango that shows traders expect prices to recover in later months.
?It will take time for the cuts to go through, but if they"re implemented we should see Brent rebound to average $74.50 in the fourth quarter,? said Drollas, the CGES analyst.