Oil prices fell sharply yesterday after Saudi Arabia announced that Opec does not need to make a further cut in production.
Prices plunged by more than 3% following the statement by Ali Naimi, Saudi Arabia’s energy minister. US crude fell by $1.78 to $51.21 per barrel, the lowest level since May 2005.
Speaking on the sidelines of an oil conference in New Delhi, Mr Naimi said: “Do not panic. Actually there is no reason for a meeting. The market is in a healthy condition and moving in the right direction,” according to the Financial Times.
However, observers noted that people should not assume that Saudi Arabia would stick to this position. “Mr Naimi has a track record of reducing market expectations for robust action only to quickly reverse his position and advocate production curtailments, thereby achieving a maximum jump in the oil price,” reported the FT.
Opec members Iran and Venezuela have recently called for further cuts in production because of falling prices, in part attributed to mild weather in the US at the beginning of the month. However, Saudi Arabia is the most influential member of the oil cartel.
The Organization of the Petroleum Exporting Countries (Opec) agreed to cut 1.2 million barrels per day (bpd) of output from November 1 2006 and will impose another cut of 500,000 bpd from February 1 this year.
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