OPEC Pact Seen Delayed; Early November Meeting Possible
LONDON Oct 13, 2006 (Dow Jones Newswires)
A public holiday in Saudi Arabia until around Oct. 23 is likely to stall any decision on an oil-production cut by the Organization of Petroleum Exporting Countries, with an emergency meeting possible by early November, officials told Dow Jones Newswires Friday.
Wrangles over how to share the burden of lowering production continue to dog members, officials and top delegates indicated.
Ministers have agreed on the need to cut the group's oil output to stem sharply-declining oil prices, but are debating by telephone and fax how to do it.
Confusing chatter from ministers and their aides in recent days has fueled skepticism by market participants over their ability to deliver meaningful cuts. Saudi Arabia, it seems, hasn't eased back on its November oil commitments to major customers.
An official at the group's Vienna headquarters noted Saudi Arabia, the group's de facto leader, is now in a holiday period in the run-up to the Eid al-Fitr festival at the end of Ramadan, due Oct. 22 or 23.
An OPEC governor said Friday that talks "are likely to go back and forth with no concrete decision until after Eid."
A formal pact appears unlikely until 10 of the group's members have resolved their differences over whether to cut 1 million barrels a day of production from their output ceiling of 28 million barrels a day or from their actual output of around 27.6 million b/d.
The governor said countries pumping crude significantly above their assigned quota were arguing for a lower ceiling. Algeria, Libya and Qatar were facing off against others in the group who would prefer cuts to come from actual output.
The thinking here is, as an example, that at 1.35 million b/d Algeria is producing 50% more crude that its quota allows, so it may have more to lose were it to agree to a cut in actual output rather than to its long-ignored quotas.
The governor didn't rule out the group meeting by early November and expected further near-term weakening in global oil prices due to the lack of concrete decisions from OPEC. Prices, he added, were likely to rebound.
A senior OPEC delegate conceded Friday that some in the group were attempting to talk prices higher, a tactic that has apparently failed given the 10-month low hit early Thursday.
U.S. light, sweet crude futures Thursday sunk to $57.22 a barrel, down more than a quarter from a record high in mid-July of $78.40/bbl. Early Friday they had recovered to $58.80/bbl.
Weakening demand among developed industrialized countries, swelling crude and product stockpiles and a quiet hurricane season in the hydrocarbon-rich U.S. Gulf of Mexico have depressed oil prices.
The delegate said he believed some OPEC members, including Saudi Arabia, are easing back a touch on output already or are offering less desirable heavier crude grades, perhaps from inventories.
Copyright (c) 2006 Dow Jones & Company, Inc.
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