OPEC president says group analyzing impact of cuts

February 7, 2009 - 0:0

LONDON (Bloomberg) -- The Organization of Petroleum Exporting Countries is monitoring the result of its production cuts to decide whether more reductions are needed at a March 15 meeting to push the price of crude to $75 a barrel, the group’s president said.

“There will be a deeper analysis from the delegates,” at the March meeting in Vienna, OPEC President Joao Maria Botelho de Vasconcelos said in an interview on Thursday in Luanda, the Angolan capital.
OPEC, which supplies more than 40 percent of the world´s oil, agreed to three supply cuts last year in an effort to halt sliding prices as world oil demand heads for its second year of contraction. The last was agreed Dec. 17 and took effect Jan. 1.
Algerian Oil Minister and previous OPEC President Chakib Khelil on Feb. 3 said “there’s a 50-50 probability of further production cuts” at the March meeting.
Botelho de Vasconcelos, who is Angola’s oil minister, agreed with Khelil and Saudi Arabia’s King Abdullah that OPEC should aim for a $75-a-barrel price, because it allows the expansion of oil production capacity. The price would enable companies like Total SA and BP Plc to continue developing fields discovered offshore Angola, he said.
“For Angola, oil companies operating in the country may opt to suspend projects if the situation continues to be unsustainable,” he said. “We have to look at the issue in terms of equilibrium of incoming revenues if it is better to cut and get the prices to satisfactory levels or continue to produce a lot at lower prices.”
Reconstruction effort
The west African nation needs the oil revenue for the reconstruction effort launched in 2002 after a 27-year civil war. The government cut its first-quarter spending plans after oil prices fell below a $55-a-barrel crude price on which it had initially based its budget.
Crude lost more than two-thirds of its value since peaking at a record $147.27 a barrel in July, as the global credit crunch slows economies around the globe, eroding demand for energy. Crude was trading in New York at $40.11 a barrel at 11:30 a.m. London time.
OPEC’s three production cuts amount to a 4.2 million barrel-a-day reduction from actual output levels in September. While its efforts so far have “stabilized” prices, Khelil said OPEC needs oil between $70 and $80 a barrel to develop new oilfields.
Botelho de Vasconcelos became OPEC’s president on Jan. 1 for a term of one year, taking over from Khelil.
OPEC oil supply cuts alone may not be enough to counter falling industrial demand, requiring reductions by non-OPEC producers to restore balance to the market, Goldman Sachs Group Inc. analysts said in a Feb. 4 research note.
Saudi Arabia Oil Minister Ali al-Naimi, the most influential minister among OPEC’s 12 member nations, is scheduled to speak at the CERA Week industry conference in Houston next week.