The Organization of the Petroleum Exporting Countries (OPEC) is ready to stage a new round of aggressive oil output cut at its upcoming 151st extraordinary ministerial meeting in the North African country of Algeria, in a bid to buttress the declining oil prices shadowed by global economic downturn.
The oil ministers of the 13-member oil cartel will gather on Wednesday in the northwestern Algerian city of Oran, where an aggressive overall output cut is widely expected to be made to weather the ailing oil market.
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OPEC Secretary-General Abdullah al-Badri (2nd L) and Algeria's Oil Minister and OPEC President Chakib Khelil smile on their arrival in the western Algerian city of Oran December 15, 2008. [Xinhuanet.com]
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Output cut widely expected
The possibility of a mega slash is mounting before the meeting as the heavyweights of the organization have suggested the cut in public.
Chakib Khelil, OPEC current rotating president, who is also the Algerian Minister of Energy and Mines, said on Dec. 6 that OPEC, which pumps nearly 40 percent of world's oil, is to cut its oil output in a "significant magnitude", in order to stem the tumbling oil prices.
He reiterated on Dec. 11 that the reduction in Oran would be "severe."
Moreover, OPEC Secretary General Abdalla Salem el-Badri also hinted a further oil output cut in early December.
He told Iran's Energy and Oil Information Network (SHANA) on the sidelines of the 13th International Oil and Gas Conference of the Institute for International Energy Studies that the OPEC "is ready to cut production by another million barrel, which is a good amount," adding that "we are all geared towards it."
Iran's Oil Minister Gholam Hossein Nozari reckoned on Nov. 30 that the global oil market is oversupplied by 2 million barrels per day (bpd), revealing the traditional oil hawk's appetite for a deep reduction.
But all of them refused to unveil the exact number, while analysts predict a cut of as much as 1.5 million bpd to 2 million bpd is feasible.
Conley Turner, Wall Street Strategies' senior research analyst, told Xinhua that "production cuts by OPEC will amount to slightly over 2 million barrels."
"There is a huge incentive for the cartel to follow through with this as the prolonged price decline is bound to have an adverse impact on the respective economies of its members," said Turner.
Olivier Jakob, managing director of Petromatrix, a Swiss-based independent research group specialized in the oil markets, told Xinhua that a supplementary cut of 1.5 million bpd should be enough to prevent an acceleration of stock build and create a favorable support to target 70 U.S. dollars a barrel.
Iran's IRNA news agency reported on Dec. 14 that Tehran calls for an OPEC output cut of 1.5 million to 2 million bpd in the cartel's coming Oran meeting.
"Our position in the upcoming OPEC meeting in Algeria is a cut of 1.5 million to two million barrels per day in OPEC's quota output," Iranian Oil Minister Gholam Hossein Nozari said.
The biggest non-OPEC exporter Russia, which was said to send a delegation headed by Vice Prime Minister Igor Sechin to the Oran meeting, said it is ready to coordinate OPEC's oil output cut to cope with the plunge in crude prices.
Russian President Dmitry Medvedev even said on Dec. 11 that the country is considering a membership of the cartel if it is in Moscow's national interests.
"In fact, even Russia has stated interest in cutting back on its production as it has vested interest in seeing oil prices stabilize," Turner said, adding that "in that case, the total cut in production including Russia will be closer to 3 million barrels a day."