Opec could cut oil production for the second time in five weeks before the end of this month in an attempt to stop the continuing decline in prices, officials said yesterday. The exporters' group called an emergency meeting on Nov 29 in Cairo as the International Energy Agency (IEA) sliced its forecast for demand growth next year by 70 per cent.
Prices have dropped by more than half since July on the worsening global economic outlook. Chakib Khelil, the president of Opec, told Algerian radio: "Arab oil producers have decided to hold a meeting in Cairo on Nov 29. On the same day, Opec will hold an emergency meeting to take the right decision." Mr Khelil, who is also Algeria's energy minister, has previously said the group might cut output again if prices continued to fall.
Opec cut its oil supply ceiling by 1.5 million barrels at its last emergency meeting in Vienna on Oct 24, in its first such decision since 2006. Major Opec producers including Saudi Arabia, Iran, the UAE and Nigeria have since confirmed they have complied with the cuts. Nonetheless, oil prices continued to fall steeply in the subsequent three weeks, declining about 15 per cent since the decision. On the Dubai Mercantile Exchange, Oman crude oil closed at US$46.98 a barrel yesterday, the first time it has settled below $50 since it started trading on the exchange last year.
On the New York Mercantile Exchange, crude futures fell for a third straight day yesterday, hitting a 22-month low of $54.67 a barrel. US crude has dropped 62 per cent since hitting a record high of $147 in July. The commodity has lost value in line with a deepening sense of gloom about the global economy. Germany officially entered recession yesterday and BT, the UK-based telecommunications company, announced it was cutting 10,000 jobs.
Recent US data on oil inventories show levels of petrol in storage have risen faster than expected as the economy slows. Demand for petrol continued to slide last week in the world's largest economy despite lower prices at the pump, MasterCards Advisors reported on Tuesday. In its monthly oil market report, the IEA reduced its demand growth forecast for next year from 1 million barrels per day (bpd) to 300,000 bpd, its biggest revision in 12 years.
The IEA's demand revision was the third in as many months, and the eighth this year. The agency now projects demand growth of only 0.1 per cent this year - meaning that this year's oil demand will be effectively flat compared with last year. It predicted a 0.4 per cent increase in oil demand to 86.5 million bpd next year. The revisions underscored the extent to which wilting economic activity was eroding oil demand in developed countries that may be sliding into recession, analysts said.
Oil consumption in the world's most developed economies will contract by 1.6 per cent next year, the IEA predicted. Underpinning the agency's latest forecast were growing indications that China's economy could be poised for a slowdown after years of rapid expansion, due to weakening western demand for Chinese manufactured goods. For the first time, the IEA cut its forecast for oil demand in China and other emerging markets, shaving its projection for the amount of oil those nations would consume next year by 260,000 bpd.
By pushing up global oil demand amid mounting concerns about supply constraints, the red-hot economies of China, India and some other developing regions, including the Middle East, were a major driving force for the unprecedented six-year rally in oil prices that ended abruptly in July. Reflecting the weakening outlooks for oil demand and the global economy, the IEA lowered its prediction for the average 2009 oil price to $80 a barrel from the $110 forecast it had held for the previous three months.
Opec, which supplies more than 40 per cent of the world's crude oil, would have to provide about 30.6 million bpd next year to balance supply and demand, the IEA said. Opec oil production in September and October stood at 32.1 million bpd. The quota cuts announced last month should reduce this to about 30.5 million bpd, the agency said. @Email:firstname.lastname@example.org