We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Fri 30 Jan 2009 02:46 PM

Font Size

- Aa +

OPEC will cut output if needed at March talks

UPDATE 1: Secretary general tells World Economic Forum that action could be taken.

OPEC will cut oil output further at its meeting in March if needed to balance the market, the group's secretary-general told Reuters at the World Economic Forum on Friday.

The comments are a strong indication the Organization of the Petroleum Exporting Countries, source of a third of the world's oil, is willing to go further to stem oil's $100-a-barrel collapse since July last year.

"If the market is unbalanced, yes we will take measures to balance the market," OPEC's Abdullah al-Badri said. "We will do anything we can to balance the market."

OPEC next meets to set supply policy on March 15 in Vienna. The group has agreed to cut production by 4.2 million barrels per day (bpd), about 5 percent of daily world demand, since September to prop up prices.

Badri said he could not "put a number" on how deep any further supply reduction would be. That, together with the final decision on whether to cut, would be determined later.

"After February 15-16 when we will have all the information, we will decide," he said.

Oil has slumped to about $42 from a record high of $147.27 as the global recession has eroded fuel use. The drop has hurt OPEC members, which depend on oil revenue.

Badri said it was reasonable to expect OPEC countries, which have to spend on housing, health and infrastructure as well as investing in new oil and gas, to take more oil off the market.

"It is realistic ... because we cannot really sell oil with this kind of price. We have to balance the market," he said.

"It's very important that they receive enough income."

The OPEC chief also said that OPEC would seek help from non-member producers, such as Russia, in lowering supply if OPEC's existing 4.2 million bpd of supply curbs did not work.

"If this 4.2 will not balance the market, I urge them to join us," he said, referring also to Mexico and Norway.

OPEC is battling the sharpest downturn in oil demand in a generation. World consumption declined in 2008 and is expected to do so this year, the first two-year drop since the early 1980s.

Some analysts believe oil use may never return to growth in the United States, now the world's largest consumer, and some other industrialsed countries as conservation and alternative fuels take hold.

Badri gave a cautious reaction when asked whether US President Barack Obama's environmental drive would have a negative impact on oil demand.

"We really encourage any other source of energy, but not to the point where ... they increase taxes (on oil) and spend the money on renewable energy."

"Fossil fuel will be the leading energy for the foreseeable future," he added.

Arabian Business: why we're going behind a paywall

For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Real news, real analysis and real insight have real value – especially at a time like this. Unlimited access ArabianBusiness.com can be unlocked for as little as $4.75 per month. Click here for more details.