OPEC Floats Oil Supply Cut

OPEC may need to cut oil output to bolster prices, oil ministers said Wednesday as the exporter group discussed holding an emergency meeting to discuss the impact of the financial crisis.

The group plans to meet on November 18 in Vienna, Algerian state news agency APS reported, quoting an unnamed source.

Oil, which hit a record high of $147.27 a barrel in July, fell to a 10-month low near $86 on Wednesday on expectations weaker economic growth will slow oil demand. While the falling price has been a relief for consumer countries, OPEC members rely on oil revenues.

The group's 13 members pump about 40 percent of the oil produced globally. Small producer Qatar said OPEC will cut supply if the financial crisis slows demand, but it was too early to say how much consumption would be affected.

But Saudi Arabia, OPEC's largest producer and the country which would be expected to lead any further supply cut, has yet to comment publicly on the oil market.

Oil rose briefly Wednesday after the U.S. Federal Reserve led a global round of interest rate cuts to bolster the world economy. But data later in the day showing a big rise in U.S. crude stocks sent prices back down.

OPEC's second-largest producer, Iran, voiced concern on Tuesday about the impact on oil demand of the credit crisis, and Libya raised the prospect of OPEC meeting before its next scheduled conference on December 17 in Algeria.

OPEC was pumping far above its official production limit earlier this year as oil prices surged, largely because of a unilateral supply increase from Saudi Arabia.

An output reduction agreed by OPEC at its last meeting, on September 9-10 in Vienna, has so far failed to stem the price fall.

It decided to comply strictly with its formal output target, a move OPEC said meant the group would cut supply by about 500,000 barrels per day, about 1.5 percent of its production in August.

An OPEC source suggested the group was unlikely to cut output in December unless the price of crude produced by its members fell below $80. OPEC's reference crude oil basket price, comprising 13 crudes from member countries, stood just above that threshold at $80.04 Tuesday.

Gold rose above $900 an ounce on speculation that moves by central banks to ease the global credit crunch won't revive financial markets, boosting demand for the precious metal as a haven. Silver also gained.

Gold futures for December delivery jumped $24.50, or 2.8 percent, to $906.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the metal reached $924.90. The price rallied to a record $1,033.90 in March after the Fed slashed borrowing costs over seven months.



TradingEconomics.com, Reuters
10/8/2008 1:45:26 PM