Opec battles price dive and faltering economy

International benchmark US crude has slumped by more than 50% from a record high of $147.27 hit in July. On Thursday it was trading below $68.

The plunge prompted the Organization of the Petroleum Exporting Countries to bring forward to Friday an emergency meeting originally set for 18 November.

As economic slowdown has destroyed demand for oil and stocks have built, most Opec ministers have said a supply cut was essential.

But leading exporter Saudi Arabia has yet to comment publicly and other ministers have differed on how much oil they should remove to limit oversupply, protect their economies and yet avoid more pain for the consumers they rely upon.

Iran’s Oil Minister Gholamhossein Nozari said on his arrival in Vienna on Thursday Opec needed to cut output by two million barrels per day (bpd).

Delegates have said at least a million bpd needed to be taken away, while Opec President Chakib Khelil said it could require more than one meeting to get the right balance between supply and demand and between producer and consumer needs.

“The concern of the producing countries is, whatever decision is made, not to have an impact on increasing the pain of consuming countries," Khelil told a news briefing.

“The decision should not leave the producer countries in the situation where they will be joining the group of countries which are already suffering from the financial crisis."

Discipline hard to achieve

Adding to the difficulty of its task, the group could struggle to enforce any reduction it agrees at its formal session, expected to begin early on Friday.

In the past, those members who most needed revenue have been reluctant to limit exports when the market is falling. The producer group’s lack of discipline helped to push oil to below $10 during the Asian economic downturn in the late 1990s.

Now, in a period of global financial crisis, even Venezuela and Iran - which have big social spending plans and are said to have the highest price needs - have said they can manage for a while on the profits of the record rally.

The most pressing need, they say, is to establish control.

“We need to manage the market. This is very important. When the price of oil is down more than 50%, if there is no management, I don’t know what will happen," Iran’s OPEC governor Mohmammad Ali Khatibi said.

Iran did not have an exact figure for where the oil price should be, Khatibi said, but together with other Opec countries, Iran has warned oil projects would cease to be economic if the market fell too far.

In that case, whatever decision Opec takes, the world’s oil supplies would in time begin to flag.

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