Majority of OPEC Governors Against Cut in March
LONDON (Dow Jones Newswires), Feb. 19, 2009
The majority of OPEC governors are opposed to a new output reduction being decided at a scheduled conference of the group in March but may support a 1.6 million barrels a day cut later, a person familiar with the matter told Dow Jones Newswires Thursday.
The person said the governors of the Organization of Petroleum Exporting Countries, who do not have a decision-making role but do influence policy, met Wednesday and opted not to add the possibility of a new output reduction on the March agenda.
But the person said the governors agreed that the market is still oversupplied by 1.6 million barrels a day and that the organization could decide a new cut of this size in the second quarter.
OPEC decided to reduce its output by 2.2 million barrels a day at a Dec. 17 meeting in a bid to halt a steep drop in oil prices.
The move came only two months after previous decisions to reduce production by 2 million barrels a day, and was the group's largest cut ever.
But it was immediately followed by oil prices dropping to their lowest level since July 2004, as the market doubted the organization's ability to implement the decision.
The person familiar with the matter said that this outcome was now influencing the thinking of OPEC officials. "It's not cautious to decide another cut if the market is going to react negatively," the person said.
Another reason to postpone a reduction, he said, is the fact that the budget of many OPEC members is already suffering from the combination of production cuts and lower oil prices.
He said that during the governors' meeting, seven countries opposed a cut in March, three favored a new reduction but were ready to bow to the majority's view, and the rest were undecided.
However, he said that the consensus view was that the market is still oversupplied by 1.6 million barrels a day. He said: "1.6 million (barrels a day) need to be pulled out.
"If prices don't improve, OPEC should convene an extraordinary meeting in April or May and decide" a cut, the person said.
Two other OPEC sources have previously expressed the view that OPEC should cut about 2 million barrels a day.
Copyright (c) 2009 Dow Jones & Company, Inc.
- BLOG: What do Rigzone Readers Think of the OPEC/NOPEC Deal? (Dec 07)
- Big Shale Turns OPEC Ally From Foe With Focus on Oil Returns (Dec 04)
- OPEC, Russia Agree Oil Cut Extension To End Of 2018 (Nov 30)