“This is a very difficult situation for all the world and not just Opec,” HE Abdullah bin Hamad al-Attiyah told Dow Jones Newswires in a phone interview yesterday, without saying whether he supports a cut in production.
Iran’s Opec governor said earlier that the group, which pumps about 40% of the world’s oil, should rein in output after oil prices fell sharply last week.
“It’s obvious everybody is thinking about a cut,” Mohamed Ali Khatibi said in a phone interview. “Nobody expects a production increase.”
A fall in oil prices below $ 80 a barrel, spurred by global market turmoil, may expose divisions within Opec as the group discusses whether to hold output firm to help bolster world economies, or make a cut to defend prices.
Iran needs oil prices to remain above $ 90 a barrel to balance its budget, according to the International Monetary Fund, a much higher level than Arab states in the Arabian Gulf such as Saudi Arabia, Qatar, the United Arab Emirates and Kuwait.
Light, sweet crude for November delivery on Friday settled $ 8.89, or 10.3%, lower at $ 77.70 a barrel on the New York Mercantile Exchange, the lowest settlement since September 10, 2007.
“At the moment, the oil market needs to be managed,” Khatibi said. Opec confirmed on Thursday that it would hold an early, extraordinary meeting on Nov. 18 to discuss an oil price drop of $ 70 from highs of $ 147 a barrel in July to below $ 80 a barrel on Friday due to concerns over oil demand amid world economic turmoil.
Some Opec members may be reluctant to make sharp cuts in output as central banks and governments across the world pump hundreds of billions of dollars into the financial system.
But falling prices will also add to domestic pressures at home especially in the booming Gulf states where billions of dollars are currently being invested into infrastructure.
Al-Attiyah said “the whole world is facing a disastrous economic situation.”
Stock markets in Saudi Arabia, Qatar, the UAE and Kuwait have been badly hit in the current turmoil with over $ 350bn wiped off the value of shares in the region’s listed companies, according to Zawya Dow Jones calculations.
Gulf states “may be willing to allow prices to fall as long as the level is still commercially viable”, said Serene Gardiner, oil products analyst at Standard Chartered Bank in Dubai.
Mohsin Khan, director of Middle East and central Asia at the IMF told Dow Jones last month that the UAE needed oil prices above $ 23 a barrel and Qatar above $ 24 a barrel to maintain a fiscal balance. Khan said Saudi needed oil above $ 50 a barrel to stay in the black.
In its monthly report released on Friday, the International Energy Agency, or IEA, trimmed its demand forecasts by 240,000 barrels a day for 2008 and 440,000 barrels a day for 2009, citing weaker demand in industrialised countries as outweighing lower prices.
The Paris-based agency warned that global oil demand this year is on course to register its weakest growth in 15 years and is likely to log similarly anemic growth in 2009.
“When the economic situation is not good, then we expect a downward revision from the demand side. All exporters, all producers should adjust their supply to the demand,” Khatibi said, adding that markets would otherwise face an oversupply situation.
Iran’s Oil Minister Gholam Hossein Nozari told the local Poul newspaper that Iran for its part would seek an output cut by Opec members and an adjustment to existing output quotas at the November meeting to stem the latest oil price slump.
“At this meeting, our country will make a request for reductions in oil production and quotas of member countries,” Nozari said, Poul reported yesterday.
