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Navigation Primary Navigation Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Secondary Navigation Africa Europe Latin America Middle East North America Search Search: OPEC struggles to find balance in oil market By TAREK ELTABLAWY,AP Business Writer AP - Saturday, November 29 CAIRO, Egypt - OPEC oil ministers on Friday downplayed expectations of, but didn't dismiss outright, an immediate output cut as they faced a third test in as many months of their ability to engineer a rebound in oil prices. The outcome of the hastily convened Cairo meeting Saturday, billed as a consultative gathering to assess the impact of earlier production cuts, likely hinges on a key issue with which the cartel has had a checkered past: unity. Kuwaiti oil minister Mohammed Al-Aleem told reporters in Cairo that while the market was oversupplied, he believed there was "no need" for the Organization of Petroleum Exporting Countries to decide on cuts ahead of its regularly scheduled Dec. 17 meeting in Algeria. But Rafael Ramirez, oil minister for price hawk Venezuela, later said the option remained to cut production by "at least 1 million barrels" at the weekend gathering. "Maybe it's necessary, a new cut," Ramirez said. He quickly added, thought, that such a decision could be taken now or next month. The diverging takes highlighted the difficulty of the task facing producers of almost 40 percent of the world's oil. "There is total confusion" among OPEC's 13 members, said Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co. in New York. "These people ... really have no business model. They basically thrive when oil prices go up, and now they are crying uncle when prices go down." And, down they have gone, in a financial avalanche triggered by demand destruction, itself sped along by a world financial meltdown that also threatens to cut deeply into OPEC member states' government budgets. Whereas crude stood at about $147 a barrel in mid-July, it now hovers about $90 lower. On Friday, the U.S. benchmark West Texas Intermediate crude for January delivery was trading at down about $3 per barrel at about $51. "They (OPEC) simply don't react quick enough, and prices keep going down," said Vincent Lauerman, OPEC expert and president of Calgary, Canada-based consultancy Geopolitics Central. This meeting will come down to what kingpin and traditional price dove Saudi Arabia wants, he said. Saudi oil minister Ali al-Naimi told reporters answers would come on Saturday. The cartel has already held one emergency meeting _ on Oct. 24 in Vienna _ to try to halt the slide in prices with an announcement of a 1.5 million barrel per day drop. It failed to support prices, and the cartel cobbled together the Cairo gathering on the sidelines of the Organization of Arab Petroleum Exporting Countries' meeting. But members have been circumspect about expectations, leading some to speculate OPEC is staying quiet to maintain the element of surprise. "As long as they do a substantive cut, they may be getting ahead of the curve, and should be cutting enough to get ahead of demand destruction," said Lauerman, citing about 1 to 1.2 million as the magic number. That has been the figure most readily cited by those nations proposing cuts, including Venezuela which, like fellow price hawk Iran, need crude of about $90 per barrel to meet current spending needs aimed in part at propping up its domestically unpopular regime. The two have found support from non-OPEC oil giant, Russia. Its president, Dmitry Medvedev, said Thursday his country would cooperate with the group to support prices. Other OPEC members, such as Nigeria and Ecuador, face budget problems too, making them reluctant to implement more cuts that might shrink revenues further. Nigerian envoy, Odein Ajumogobia, said the ministers were "just going to exchange ideas and views" at the gathering. Kuwait's al-Aleem said current low prices benefit neither consumers nor producers and could undercut investments in future projects _ a scenario that could lead to another spike down the road. "We think a decision could be taken, but I think it will happen in Algeria," he said. OPEC's last round of cuts would put its total production at about 30.5 million barrels per day, according to the IEA. Unlike many of their fellow members, the Saudis are better positioned to cope with the drop in prices. The International Monetary Fund estimates Riyadh needs crude in the range of about $50 per barrel for 2008 fiscal accounts to break even. While al-Naimi refused to tip his hand, an indication of the Saudi thinking may have emerged earlier this month when, during the Group of 20 meeting in Washington, King Abdullah pledged the kingdom would do everything in its power to help the global economy recover. Higher oil prices would undermine that promise. Also unclear, after two earlier cuts failed to push prices higher, is what the group can do without prolonging the global economic downturn. "I would play 'good cop' and not do anything," said Oppenheimer's Gheit. "If they are patient, they will be rewarded because you will see a precipitous drop in capital spending, and that will tighten the market, in itself." But demand has shown little indication of rebounding soon, and global crude stockpiles are growing _ as evidenced by a U.S. government report showing a surprisingly large 7 million barrel build in stocks last week. Those factors argue against restraint if some in OPEC want crude back up to at least $70. Even so, Algerian oil minister and OPEC president Chakib Khelil has urged a wait-and-see approach, saying that the group risks losing credibility if it enacts new cuts in Cairo only to find members were not complying with the Vienna decision. Political considerations are also likely to factor prominently. Saudi Arabia is a close U.S. ally in the Middle East, and is eager to see concerted Washington backing for peace efforts in the region. One way of winning new support from the incoming administration of U.S. President-elect Barack Obama would be by tacitly working to undercut two of Washington's most strident foes, Venezuela and Iran. It would not be an onerous job for the Sunni Muslim Saudis, who have no great affection for Shiite Iran. "Saudi Arabia is playing ball with the U.S.," said Gheit. "It is going to punish Venezuela. It is going to punish Russia. It is also going to curtail Iran." ___ AP Business Writer Adam Schreck contributed to this report. Email Story IM Story Printable View Blog This Recommend this article Average (0 votes) Sign in to recommend this article » Most Recommended Stories » Related Articles: Oil Price Hike OPEC struggles to find balance in oil marketAP - Saturday, November 29 Oil ends week on a flat note as OPEC gathersAP - Saturday, November 29 OPEC says oil stocks high but might delay cut until DecemberAFP - Saturday, November 29 Slight fall for oil in quiet Asian tradeAFP - Friday, November 28 Related Articles: World Brazil govt: Amazon deforestation up slightlyAP - 22 minutes ago Peru archaeologists find mummy near Machu PicchuAP - 37 minutes ago Iowa cafe swamped with orders for 'Obama cookie'AP - 45 minutes ago Hariri tribunal expected to start on March 1AP - 46 minutes ago 2 dead after shots fired in SoCal Toys 'R' UsAP - 1 hour 3 minutes ago Related Full Coverage oil price hike oil price hike All Full Coverage Most Popular – World Viewed US clears Bank of America deal for Merrill Lynch US president's mother 'doing very well' in hospital: Laura Bush Love handles increase death risk: study Michael Jackson strikes 'amicable' deal with Arab sheikh Obama vows 'help is on the way' for the economy View Complete List » Search: Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular

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