OPEC to Delay Production Decision to Next Month

By Maher Chmaytelli and Ayesha Daya

Nov. 29 (Bloomberg) -- OPEC members, who agree oil supply is exceeding demand, will delay a decision on whether to cut production again until next month, giving them time to assess previous attempts to halt a plunge in prices.

A meeting in Cairo today will prepare the ground for the Dec. 17 summit in Oran, Algeria, said Ali al-Naimi, oil minister of Saudi Arabia, the world’s largest exporter and de facto OPEC leader. “We will decide on a firm measure when we meet in Oran.” Asked if the producer group would seek to lower output then, he replied: “A cut is possible, we will have to see.”

Crude oil prices have slumped 62 percent from July’s record of $147.27 a barrel as the global recession cuts fuel demand. Prices continued to slide even after the Organization of Petroleum Exporting Countries, the producer of more than 40 percent of the world’s oil, decided on Oct. 24 to reduce production quotas by 1.5 million barrels from this month.

Al-Naimi said there was a “good logic” for oil at $75 a barrel, backing earlier comments from Saudi King Abdullah who told Kuwaiti newspaper Al-Seyassah that this represents a “fair price.” Crude oil for January delivery traded at $54.43 a barrel in New York yesterday.

Oil industry inventories should ideally be equal to about 52 days worth of demand, al-Naimi said. Stockpiles exceeded that level in the third quarter, reaching about 55 days of forward demand. Today’s meeting in Cairo started at 1 p.m. London time.

Bloomberg Survey

OPEC will likely lower supplies before the end of the year, according to 18 of 21 analysts surveyed by Bloomberg. Twelve predicted the reduction will be at least 1 million barrels a day, more than is pumped by Qatar.

Chakib Khelil, the group’s president who is also the oil minister of Algeria, said some supply needs to be removed from the market because members can’t find buyers for all their oil.

“Some countries are unable to sell their crude,” he told reporters in Cairo. “Crude should be taken off the market. The market is oversupplied.”

OPEC called a “consultative” meeting of ministers for today rather than wait until its next scheduled December conference in Algeria, as the slowing world economy reduced global consumption faster than expected. In September, the group urged greater compliance with existing output limits.

Earn Less

Oil producers and drillers from Exxon Mobil Corp. to BP Plc are already suffering from falling prices. OPEC’s oil export revenue will be $979 billion in 2008, 9.6 percent less than expected a month ago, because of sinking crude prices, the U.S. Energy Department forecasts.

The Cairo meeting, originally intended just for ministers from Arab nations, was expanded into a full OPEC meeting, including countries like Venezuela, Iran and Angola.

The 11 OPEC states subject to output quotas will produce 27.8 million barrels a day in November, according to Geneva- based consultant PetroLogistics Ltd., in excess of their official limit of 27.3 million barrels a day.

OPEC members have a delicate act to balance as they strive to boost prices without overreacting in terms of production cuts and being blamed for exacerbating the economic slowdown.

Demand for oil may fall for the first time since 1983 next year, Merrill Lynch & Co. said, as the U.S., Europe and Japan face their first simultaneous recession since World War II.

Eleven years ago, OPEC members bickered over quotas as oil prices slid 28 percent in 10 months amid the onset of the Asian financial crisis. At a meeting in Jakarta in November 1997, they raised quotas, even as economic turmoil in Asia was slowing demand and prices fell another 44 percent by December 1998 to a low of $10.35 in New York.

The other OPEC nations are the U.A.E., Qatar, Kuwait, Nigeria, Iraq, Indonesia, and Ecuador.

To contact the reporter on this story: Maher Chmaytelli in Cairo at mchmaytelli@bloomberg.netAyesha Daya in Cairo at adaya1@bloomberg.net