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Oil prices above 60 dollars as OPEC mulls emergency meet

(AFP) / 5 October 2006

LONDON - World crude prices leapt above 60 dollars on Thursday after the OPEC president indicated the international oil cartel might hold an emergency meeting on whether to cut output.

New York’s main contract, light sweet crude for delivery in November, surged 1.24 dollars to 60.65 dollars per barrel in pit trading.

In London, Brent North Sea crude for November delivery soared 1.47 dollars to 60.69 dollars per barrel in electronic trading.

Edmund Daukoru, president of the Organization of Petroleum Exporting Countries, told AFP on Thursday: “We are toying with the possibility of having an emergency meeting.”

Daukoru, who is also Nigerian Oil Minister, dismissed suggestions that the organisation had already reduced its daily output of 28 million barrels by one million.

“We are still consulting on whether we should have an emergency meeting or not,” he said.

“It is at such a meeting that we will come up with an appropriate action.”

Meanwhile in Algiers, the Algerian press agency APS quoted an ”informed source” who said the meeting would take place on October 18-19 in Vienna.

Crude futures were rising on Thursday “with strong support coming from suggestions that OPEC may make larger cutbacks in production”, Sucden analyst Michael Davies said.

The Financial Times had reported earlier in the day that OPEC has agreed informally to cut oil output by one million barrels per day, or 4.0 percent, to bolster prices that have dropped about 25 percent from record levels in July and August.

A majority of the cartel back a voluntary reduction and the deal could be ratified as early as a mid-December meeting in the Nigerian capital of Abuja, the FT said.

Its report comes less than a week after OPEC members Nigeria and Venezuela voluntarily began reducing their oil production by a combined 170,000 barrels per day.

The Financial Times said Saudi Arabia, the world’s top producer and OPEC’s most important member, is unhappy with the move towards voluntary cuts even though it has quietly cut its output by 200,000 bpd over the past two months.

Societe Generale analyst Deborah White explained that the Saudis were happy to see prices fall further.

“The Saudis have been extremely concerned over the rise of competitive fuels, including biofuels like ethanol,” she said.

“The price run up has brought in a lot of alternative fuels,”  reducing demand for crude, White added.

“It’s damaging oil prospects in the long term and Saudi Arabia don’t want things to get any worse.”

Meanwhile OPEC’s discussion on cutting output comes amid concerns that once through the northern hemisphere winter, the second quarter of 2007 could see a sizeable oil glut unless production is reduced well in advance, the FT said.

Oil prices soared to record highs in July and August as the market looked at rising US demand and the possibility of UN sanctions being imposed on Iran, a major exporter, over its nuclear programme.

Israel’s offensive against Hezbollah guerrillas in southern Lebanon added to the geo-political concerns but the markets have since become more relaxed about these factors while stockpiles in the United States, the world’s biggest energy consumer, have grown.

World oil closed higher on Wednesday after initially tumbling below 58 dollars per barrel. Brent crude reached 57.70 dollars -- the lowest point since December -- owing to a bumper rise in US crude stockpiles, dealers said.

 

 
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