Olaim refused to be drawn into saying how much OPEC should reduce production, adding this decision should be taken by all OPEC ministers. "There is a surplus in the market and the supply is more than the requirements of the market," he said. "There is a building up of inventories for the time being which have exceeded the average of the last five years. We are talking now about 56.8 days which is more than the average.
OPEC officials yesterday also called on major non-OPEC producer Russia to slash its production as well. The OPEC secretary general said yesterday that an over-supplied oil market needed a hefty output cut, sending crude prices surging back above $ 50 a barrel on world markets. OPEC’s president meanwhile said there was unanimous support in the organization for a cutback as crude demand is set to fall further next year amid a global economic slowdown.
The remarks underpinned market expectations that the Organization of Petroleum Exporting Countries – a cartel pumping 40 percent of world crude – will take action to further boost oil prices at a meeting in Oran tomorrow. OPEC is expecting Russia to cut its oil output by up to 300,000 barrels a day as part of coordinated measures to halt the plunge in the price of crude, the Russian oil giant Lukoil said yesterday.
The ability of OPEC to influence the market will partly depend on whether it succeeds with a campaign to convince major non-member producers such as Russia, Mexico and Norway to reduce their output too. "We hope the non-OPEC countries will help. The market is in a very difficult situation," OPEC Secretary General Abdalla Salem El-Badri told reporters on his arrival in Oran. He added that he would like to see "a very sizeable cut" in crude oil production, adding that "the market is oversupplied with oil.
And OPEC president Chakib Khelil said: "Everybody (at OPEC) is supporting a cut … I don’t have any doubt about it." Khelil added that he hoped Russia would one day become a member of the oil producers’ cartel in order to boost the group’s impact on the crude market. "We would like appropriate support on the ground from Russia," he told reporters. "We have always wanted Russia to join OPEC. "Russia would be of special importance to OPEC if it joined, it would increase OPEC’s strength in terms of production share, which would become around 50 percent (of world output) rather than 40 percent.
Khelil said on Saturday that Russia would be represented at the meeting here by Deputy Prime Minister Igor Sechin and Energy Minister Sergei Shmatko at the meeting in Oran. "It’s a delegation that is going to be very strong, with about 20 people. We hope their decision will reflect the level of their representation," the OPEC head said. Oil prices have plunged by as much as 70 percent since reaching all-time highs of above $ 147 a barrel only five months ago as a global economic slowdown dents energy demand
We are very pessimistic about demand," Khelil said yesterday. Khelil, who is also Algeria’s energy minister, added that a price of $ 75 a barrel would be good for producers and consumers. The International Energy Agency (IEA) on Thursday said it expected global oil demand to fall this year for the first time since 1983. Analysts are forecasting a cut of between one million and two million barrels from OPEC’s official daily output quota of 27.3 million barrels, excluding Iraq.
We are expecting cuts of around two million barrels, as OPEC needs to show their commitment to bringing markets back in equilibrium and prevent a supply glut," said Nimit Khamar, oil analyst at Sucden brokers in London. "In our opinion anything less than two million barrels may not be enough to calm markets and prevent prices falling back towards recent lows. OPEC has so far agreed on cuts of 2.0 million barrels per day this year but the IEA – a Paris-based energy policy advisor – has cast doubt on the willingness of some members of the cartel to reduce their exports.