October 24, 2008 - OPEC ministers Friday agreed to cut crude production by 1.5 million b/d
from the beginning of November, citing the global economic slowdown,
oversupplied markets and the likelihood of a deepening fall in demand for oil.
Some ministers had suggested ahead of the emergency talks that output
could be cut in two stages, including a possible second cut at the December 17
meeting in Oran, Algeria.
But Saudi oil minister Ali Naimi said he currently saw no reason for OPEC
to make a second cut, although he said that a big drop in oil demand could
prompt OPEC to take further action.
"As we stand now we see no reason to take another cut," Naimi said.
"Nobody is talking about a second cut. Let us see what this cut does before we
talk about a second cut. There may be an increase. Who knows?" he said, adding
that he hoped the cut would stabilize the market.
Asked again later whether OPEC could agree a new cut before the December
meeting, he said: "It's possible. We hope not. We are therefore not looking at
one right now. But if the situation deteriorates and demand really falls, we
have to take measures to prevent the collapse and the destabilization of the
oil market."
OPEC said in its official communique that the global financial crisis was
already having a "noticeable" impact on the world economy, "dampening the
demand for energy in general and oil in particular." It said the slowdown in
oil demand was exacerbating an existing oversupply on world markets.
"Moreover, forecasts indicate that the fall in demand will deepen,
despite the approach of winter in the northern hemisphere," it said.
The communique also noted the "dramatic collapse" of oil prices, which,
"unprecedented in speed and magnitude...may put at jeopardy many existing oil
projects and lead to the cancellation or delay of others, possibly resulting
in a medium-term supply shortage."
Saudi oil minister Naimi, meanwhile, said OPEC's decision to cut output
had "nothing to do with the world recession" and was mainly to do with the
imbalance between supply and demand.
"There is a huge build in inventories. We cannot allow to have a mismatch
between supply and demand. If the world does not need oil why do you flood it
with oil?" he said, adding that OPEC had cut output by the same volume by
which world markets were oversupplied. "The oversupply we believe is 1.5
[million b/d] and that's reason we took out 1.5 [million b/d]."
"Demand is subsiding...and it may go down in other economies like China
or India so we have to be responsive to demand," he said.
"The recession has nothing to do with the price of oil," he reiterated.
"It's the mismanagement of the financial situation and OPEC has nothing to do
with it."
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