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OPEC official says new production cuts unlikely

More oil output reductions aren't likely this month because OPEC members haven't yet fully enforced previous quotas and the organization needs more data before it reaches a decision.
/ Source: The Associated Press

More oil output reductions aren’t likely this month because OPEC members haven’t yet fully enforced previous quotas and the organization needs more data before it reaches a decision, the cartel’s president said Sunday.

Chakib Khelil’s comments came as Iran called for a new output cut of at least 1 million barrels per day, in addition to the 1.5 million cut decided by the Organization of Petroleum Exporting Countries on Oct. 24 to try to sustain slumping prices.

The Iranian statement led some observers to consider that the 13-member producer’s cartel could decide to further diminish production during its special session in Cairo on Nov. 29.

But Khelil, who is also Algeria’s energy minister, said it wasn’t realistic to expect the cartel to reach a decision before the organization collects all the data on current output levels.

Iran’s call for more cuts is “a wish,” Khelil said.

“It’s unlikely there will be sufficient data to reach a realistic decision” at the Cairo meeting, he said. Such a move is more likely on Dec. 17 when OPEC holds its summit in the Algerian city of Oran.

“In Oran, we’ll have all necessary information to make the right decision,” he said.

Kuwaiti oil minister Mohammed al-Eleim told the country’s official news agency that it would be willing to slash production if OPEC agrees to a cut.

“Kuwait will not hesitate to support the market... and at the same time will cut production if the market is suffering from surplus according to what will be agreed on by OPEC members,” he said.

OPEC, which produces about 40 percent of the world’s crude oil, had hoped its production cut in October would halt the dramatic fall in prices from a record $147 in July to below $70. And oil prices are continuing their spiral downward. Light, sweet crude for December delivery fell $1.20 to settle at $57.04 a barrel on the New York Mercantile Exchange on Friday.

Khelil, who was speaking on the sidelines of an international oil conference convened in Algiers, said prices would likely continue to weaken until buyers felt the effect of OPEC decisions.

“Currently, the market doesn’t take us seriously” because some members haven’t fully enforced quotas, the OPEC chief said. He declined to list which countries weren’t implementing the cuts, and stated that OPEC doesn’t have power to enforce decisions.

“The only penalty (for countries not respecting quotas) is that they see their revenues diminish” because prices continue to slump, he said.

A “balanced price” for oil should range from $70 to $90 per barrel, Khelil said.

Prices consistently below this would not favor consuming countries any more than producers because they would prevent investment for future drilling and lead to a renewed shortage within a few years, he said.

Price stability is crucial to exporting countries like Algeria, where 97 percent of exports come from the sale of hydrocarbons.

The North African nation has the eighth-largest reserves of natural gas, and ranks 14th in oil reserves.