OPEC May Meet in Cairo to Discuss Oil Production Cut

By Maher Chmaytelli

Nov. 13 (Bloomberg) -- OPEC, the supplier of 40 percent of the world's oil, may hold a full meeting in Cairo at the end of the month to discuss a production cut as crude fell to the lowest in 21 months.

OPEC ministers and officials are consulting by phone and are concerned about the slide in prices, said a delegate of a member nation who declined to be identified by name because the deliberations are confidential. A meeting is likely before a Dec. 17 summit of the 13-member Organization of Petroleum Exporting Countries, in Algeria, the official said.

Oil has plunged 62 percent from a record $147.27 a barrel on July 11 on expectations the global economic slowdown will erode consumption. The group last month announced a 1.5 million barrel-a-day cut and in September urged members to adhere to existing quotas, a move officials said would reduce actual supplies by about 500,000 barrels a day.

``It's now a very tough time for them since cuts are extremely difficult for most of them to make,'' said Edward Morse, managing director and chief economist at Louis Capital Markets LP, at a conference in Rome today. ``What they have to do is confront the inevitability of another production cut and the question is how they orchestrate it given the lack of compliance so far.''

Crude oil for December delivery rose 64 cents to $56.80 a barrel as of 12:41 a.m. London time on the New York Mercantile Exchange. The contract traded earlier at $54.67 a barrel, the lowest since Jan. 30, 2007.

1 Million Cut

Cairo is scheduled to host a meeting of Arab oil ministers on Nov. 29. Non-Arab members of OPEC, like Venezuela, Iran and Angola, may now join to have a full meeting. OPEC's Arab members are Algeria, Iraq, Kuwait, Libya, Qatar, Saudi Arabia and the United Arab Emirates.

``I think OPEC may decide to cut 1 million barrels per day at the Cairo OAPEC meeting at the end of the month,'' said Johannes Benigni, chief executive officer of Vienna-based consultant JBC Energy. ``It looks likely the group's non-Arab members will attend as well.''

The International Energy Agency today slashed its 2009 oil demand forecast for a third month, its biggest cut in 12 years, because of the deteriorating economic outlook.

Libya's top oil official, Shokri Ghanem yesterday said OPEC should discuss ``all options,'' including a production cut that would be its third in as many months. He called on Russia to help OPEC's efforts by also reducing production.

Ecuador

Nigerian Oil Minister Odein Ajumogobia and Iran's OPEC governor Mohammad Ali Khatibi said they may back an early meeting. Qatar wants prices at $70 to $90 a barrel, Prime Minister Hamad Bin Jasim Al-Thani said earlier this week.

OPEC's smallest member, Ecuador, said it won't accept a further cut in output, asking those who are overproducing to cut theirs instead.

Morse said Saudi Arabia, OPEC'S top producer, has reduced output by about 700,000 barrels a day in compliance with the decision of last month. The kingdom's production stood at 9.35 million barrels a day in October and should drop to an OPEC quota of 8.47 million barrels a day this month.

OPEC produced at a rate of 32.18 million barrels a day in October, according to Bloomberg estimates. The target output of the 11 members with quotas is 27.3 million barrels a day in November, down from a Bloomberg estimate of 29.1 million barrels a day in October.

War-torn Iraq is allowed to produce at will, while Indonesia is planning to leave OPEC by year end.

To contact the reporters on this story: Maher Chmaytelli in Nicosia, Cyprus, at mchmaytelli@bloomberg.net;