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WORLD> Middle East
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OPEC ready to cut oil output as prices dive
(Xinhua)
Updated: 2008-12-16 11:17 Falling oil prices on global downturn During the past four months, the OPEC had made two coordinated cuts to shore up the plunging prices. A modest cut of 520,000 bpd was made on Sept. 10 and then a 1.5-million one was announced on Oct. 24 in its Vienna meeting. But the two decisions both failed to revive the falling prices.
Later at its consultative meeting in Cairo on Nov. 29, the cartel decided to maintain crude oil output until its meeting in Algeria's Oran. Defying the organization's supply maneuver, oil prices have plummeted from its zenith of some 147 dollars per barrel on July 11 to some 40 dollars a barrel, shedding about 70 percent over the past five months. On Monday, Brent North Sea crude for delivery in January hit US$45.81 in London's Inter Continental Exchange, while light, sweet crude for January delivery was once traded briefly above US$50 a barrel in the New York Mercantile Exchange, indicating a market digestion of the cut expectations. As the global economic downturn is rippling through every corner of the world, stagnation and the ensuing shrink of demand, oil in particular, prevails among the major crude consumers, including the United States, Europe and Japan. According to OPEC's forecasts on Nov. 29, oil demand will not revive significantly until the first half of next year, given the concerns of a worldwide recession. The Organization for Economic Cooperation and Development (OECD) forecast last month that the economy of the United States, the biggest oil consumer, will shrink by 0.9 percent next year with contraction in the first half of the year, giving way to a "languid" recovery. The Paris-based intergovernmental think tank, whose member countries account for 60 percent of world economy, also warned that the downturn was still far from its nadir at the end of this year, adding the growth rate for the 27-member European Union in 2008 is projected to be only 1.4 percent, less than half of that in 2007. The oil cartel realized that "in the first quarter of next year we are probably going to have a decline in demand," according to Khelil on the sidelines of a OPEC ministerial conference in Cairo on Nov. 29, which paved the way for the Oran meeting. Taking all the clues into account, the chance of a decisive cut by the OPEC in the upcoming meeting is beyond even, though the outcome is still unpredictable and the short-term momentum of the reduction remains volatile.
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