x Abu Dhabi, UAEFriday 21 July 2017

Opec faces key questions ahead of crucial meeting

Body must decide whether it should stabilise oil markets or promote crude prices sufficient to sustain investment in future oil supply.

OPEC will ask non-member oil exporters to show "solidarity" with its efforts to stabilise the world oil market by curbing their own output, the group's president said yesterday. The call by Jose Maria Botelho de Vasconcelos, who is also Angola's oil minister, follows conflicting signals from OPEC ministers about the likely course of action at their policy meeting on March 15 in Vienna. "We will continue to appeal to non-OPEC members who also have a significant production to contribute with their share for the just equilibrium of the prices," Mr Vasconcelos said in Luanda. Ten years ago, the oil exporters' organisation used a similar tactic to spread the cost of production cuts beyond its own members, when it made lower oil output by non-OPEC producers a condition of further reductions to its quotas. With crude trading near US$40 a barrel, more than 70 per cent below its July peak of $147.27, OPEC must decide whether to cut supplies further, having already removed 4.2 million barrels per day (bpd) from its ceiling. On Saturday, Chakib Khelil, the Algerian oil minister, said a further output reduction was "quite possible". His Venezuelan counterpart, Rafael Ramirez, said OPEC would consider how to raise the crude price above $70. Iran's oil minister, Gholamhossein Nozari, said he did not expect another production cut because the oil price slide had been stemmed. "If OPEC members remain fully committed to OPEC cut decisions, it will have an impact on the oil market," he said. Mr Nozari said Iran would present a "solution" at the Vienna meeting for raising oil prices without the need for further OPEC cuts. He did not elaborate on the nature of the proposal. On Monday, crude fell 10 per cent to dip below $40 on the New York Mercantile Exchange, reversing a three-day rally to above $45 a barrel. "We had the run-up last week, but now people are looking at weaker demand signals, and that's making them think we're going to need another round of cuts from OPEC," Michael Lynch, the president of the US consulting firm Strategic Energy and Economic Research, told Associated Press. Despite evidence that OPEC members have delivered more than 80 per cent of the cuts already pledged, crude prices are still far from the $75 a barrel that King Abdullah of Saudi Arabia in November said was "fair". Monday's steep price decline followed the release of US government data suggesting that the economies of the world's three top oil-consuming countries - the US, China and Japan - were all contracting. tcarlisle@thenational.ae