OPEC to cut output by 'good amount'

OUTPUT CUT: Al Badri said OPEC would reduce output by a 'good amount' at its December meeting. (Getty Images)

High OECD oil stocks show the oil market is oversupplied and OPEC will likely cut supplies when it meets later this month in Algeria, the grouping's secretary general said on Monday.

"The market is oversupplied because we are seeing stocks as very high, about 55 to 56 days," Abdullah Al Badri told reporters on the sidelines of an energy conference in Tehran.

Asked whether there would be a decision to reduce output at the cartel's Dec. 17 meeting in Algeria, he said: "There will be action there... It will be a good amount, a good quantity," without giving any specific figure.

The 12-member Organisation of the Petroleum Exporting Countries held an informal meeting in Cairo on Saturday but deferred a decision on a new oil supply cut to its next policy-setting meeting in Algeria.

Delegates said most members, including Gulf producers led by Saudi Arabia, saw a requirement to slice another one to 1.5 million barrels per day (bpd). But for that to happen, delegates said, Riyadh wants proof that all fellow members are meeting their part of existing curbs.

Oil stocks in the OECD rose to 56 days worth of forward demand last month - the top end of the five-year end norm for this time of the year - and have been a worry for OPEC, which uses them as a key gauge of whether markets are oversupplied.

Asked what kind of stock levels OPEC would like to see, Al Badri said the organisation was aiming at 52 days. "I think we are looking for 52 days. This is the average for the last five years," he said.

OECD inventory levels have hovered at or above their seasonal norm for several months, although relative stock levels normally fall during the winter as heating fuel demand picks up.

Asked about the oil price, Badri echoed comments by Saudi Arabia: "I think $75 is reasonable," he said.

Saudi Arabia on Saturday cited $75 a barrel as a "fair price" for oil in order to keep the more expensive new projects at the margins of world supply on track, the first time in years that the world's biggest exporter has identified a price target.

Oil fell more than a dollar on Monday, towards $53 a barrel, after OPEC decided to delay a decision on a third supply cut.

The price has tumbled from record highs over $147 a barrel struck in July as demand in the United States and other large consumer nations has slumped amid an economic crisis.

Al Badri said in a speech at the Tehran conference that demand could fall next year because of the sharp slowdown in the world economy.

"With oil prices below half of what they were at the beginning of the year both producers and consumers should have cause to be concerned about the investment climate for the industry," Al Badri said.

"We need to take action or actions in this critical period in support of the market order and stability for the short-, medium- and long-term," he said. (Reuters)

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