OPEC oil ministers will likely decide to keep output at present levels, the group’s president said Tuesday, suggesting that most members could accept prices at $100 a barrel.
Ministers of the 13-nation organization are expected to make a formal decision late in the day or early Wednesday on what to do about production amid rapidly falling prices.
Oil prices closed below $104 a barrel Tuesday, a 30 percent decline from July.
OPEC President Chakib Khelil suggested most members would rather accept lower-priced crude than see a broader destruction of demand that has occurred over the last several months as oil set one price record after another.
“We will probably stay at the (present) level,” Khelil told reporters.
Amid expectations that OPEC would leave production unchanged, oil prices dropped below $104 a barrel Tuesday, even before the comments by Khelil, who is also Algeria’s oil minister. The belief that Hurricane Ike would miss critical Gulf Coast oil installations dropped crude prices to $103.26 per barrel on the New York Mercantile Exchange, the lowest settlement price since April 1. Prices dipped as low as $102.20 Tuesday.
Support for maintaining current production levels has been building, with OPEC powerhouse Saudi Arabia suggesting the ministers would opt against cutting back.
“The market is fairly well-balanced,” Oil Minister Ali Naimi told reporters. “I think things are in balance, in a healthy position.”
Naimi, whose country accounts for about a third of OPEC production, appeared to rebut calls for a cutback from Iran, OPEC’s No. 2 producer and a traditional OPEC price hawk.
Other OPEC ministers have been less strident in calling for a tightening of the oil spigots, despite oil’s fall from $147 a barrel in July. OPEC nations account for two-thirds of the world’s known oil reserves, and about 40 percent of the world’s oil production, affording them considerable control over the global market.
Venezuela is also normally among those backing higher prices. But on Tuesday Venezuelan Oil Minister Rafael D. Ramirez said there was no immediate need to lower production — even while warning of a likely oversupply by year’s end.
“We think we can keep ... current output levels,” he told reporters. Still, he suggested that OPEC would have to consider cutting back in the coming months, saying the organization estimated that demand would fall by close to 1 million barrels by December.
That, and present overproduction of 1 million to 1.5 million barrels a day, means “we need an action plan from here to December to keep the market balanced,” he said.
Mohammed Abdullah Al-Aleem — Kuwait’s oil minister and a member of an OPEC committee whose recommendations could influence OPEC’s final decision about output — also said there is no need for OPEC to cut production “for the time being.”
His Iraqi counterpart, Hussain Al-Shahristani, described the market as “well-supplied, if not oversupplied.” Asked what he thought was a reasonable price for OPEC oil, he replied: “Where we are now.”
Iraq is the only OPEC member not under production quotas because of the conflict there.
Al-Shahristani said Iraq was producing 2.5 million barrels a day as of early this month, with violence down, adding he expected that to rise to 2.7 million barrels of crude a day by the end of September.
Asked whether present prices reflected market fundamentals, Khelil told reporters: “Right now, fundamental prices would probably be in the range between $90 and $100, suggesting prices could go even lower before they aroused concern.
In separate comments, he said a large-scale move out of the oil market by speculators “has helped drive prices down” but warned their return could again roil prices and set off an unwarranted upward spiral.
“There is too much at stake across the world for such high levels of volatility to be allowed to continue in this chaotic, damaging manner,” he said.
He attributed the steep price decline of past weeks to the “recent strengthening of the dollar, the easing of geopolitical tension and the sharpened expectations of a global economic slowdown.
Still, prices remain 14 percent higher this year than in 2007, and a barrel of benchmark crude still fetches four times what it did five years ago.
While high prices drive down demand, $100 per barrel for some OPEC members is a psychologically important benchmark. Venezuela warned ahead of the meeting that slippage much below that mark should trigger production cutbacks, although the Saudis have suggested they could live with prices between $80 and $90.
Such diverging opinions could set the stage for a struggle in December, when OPEC is scheduled to meet again — or even prompt emergency consultations before that.
“If winter demand doesn’t come around, the OPEC might have to cut production below its set target,” said Ehsan ul-Haq, head of research at JBC Energy in Vienna, Austria.
He mentioned a further downturn in the U.S. economy and the possibility of a mild winter as possibly depressing the world’s appetite for crude by year’s end.
With most of the oil ministers observing the Islamic month of Ramadan, the meeting on output levels was set for late in the evening.