OPEC Says Won’t Hesitate to Reduce Production Further

By Maher Chmaytelli and Juan-Pablo Spinetto

Jan. 29 (Bloomberg) -- OPEC, supplier of 41 percent of the world’s crude oil, won’t hesitate to cut output further to keep prices from falling, the group’s secretary general said.

“If we still have some downward problems, OPEC will not hesitate to take some quantity out of the market,” Abdalla el- Badri said today at the World Economic Forum, in Davos, Switzerland. Prices below $50 a barrel are “too low” as they don’t allow producers to invest in expanding capacity, he said.

The Organization of Petroleum Exporting Countries cut production three times since September to check a plunge in prices from a record $147.27 a barrel in July. Crude oil for March delivery traded at $40.69 a barrel on the New York Mercantile Exchange as of 2:20 p.m. London time.

The group next meets in Vienna on March 15 to discuss output. El-Badri yesterday said producers wanted crude at $75 a barrel to $100 a barrel.

BP Plc Chief Executive Officer Tony Hayward, speaking today in Davos, said prices between $60 and $80 a barrel are “appropriate” to sustain investments.

“We increase when the market needs oil and we decrease when the market is in overproduction,” el-Badri told reporters today. “There is a lower demand in 2009 by about 200,000 barrels a day, maybe more. There’s a slowdown everywhere.”

Hayward said the global economic recession may cause oil demand to drop five times more than OPEC estimates.

Pessimistic View

“If you take the more pessimistic view, which says there will be effectively no growth at all in the world in 2009, I think that demand loss of perhaps up to 1 million barrels per day is more likely,” he said. “So it depends entirely on the success the world has in getting the economy moving again.”

OPEC has set a production ceiling of 24.845 million barrels a day as of Jan. 1 for its 11 members with quotas, 4.2 million barrels a day lower than its output in September. Iraq is allowed to produce at will.

Badri said that that the reduction will be fully implemented by the end of this month.

Oil shipping consultants PetroLogistics Ltd. estimates that OPEC members will supply about 1.3 million barrels a day more than their new collective target this month. Oil supply from the 11 members with quotas will average 26.15 million barrels a day, down from 27.65 million barrels a day in December, Conrad Gerber, the consultant’s founder, said on Jan. 23.

To contact the reporter on this story: Maher Chmaytelli in Davos, Switzerland, at mchmaytelli@bloomberg.net; Juan Pablo Spinetto in Davos, Switzerland at jspinetto@bloomberg.net