Ali Naimi, Saudi oil minister, said on Monday that an important Opec meeting to decide whether to increase production was still “wide open”, leaving the oil market awaiting fresh direction from the main producing group.
The Organisation of the Petroleum Exporting Countries, the cartel that controls 40 per cent of world oil supply, will weigh in Abu Dhabi on Wednesday its desire to see lower oil prices against the risk that a US economic slowdown would reduce energy demand, making a supply increase unnecessary.
Arriving at the Emirates Palace hotel in Abu Dhabi, Mr Naimi said that he and his colleagues had not looked at all the data. “Tomorrow and the day after, we will have the opportunity to look at all the data and assess and decide,” Mr Naimi said.
”Right now [it] would be very premature to say what that assessment would be,” he added.
Opec appears split between those such as Saudi Arabia, which put more weight on the long-term damage to the global economy from high oil prices, and others such as Venezuela, which want the cartel to keep prices close to $100 a barrel.
Crude oil prices on Monday fell $1.35 to a month-low of $87.36 on fears that the US economic slowdown would damp oil demand and that, in spite of that, Opec would increase its supply.
Senior Opec officials, including Mr Naimi, have stressed in the run-up to their meeting that the market is “well supplied” and crude oil inventories are “comfortable.”
However, the cartel made similar comments ahead of its September meeting, only to announce shortly afterwards an increase of 500,000 barrels a day as part of its contribution to global economic stability. The increase took effect on November 1.
Industry officials familiar with Opec policy said last week that the cartel would consider backing a further increase of 500,000 b/d to calm consumer countries. But they warned that an agreement was far from a done deal.
With oil prices declining from their recent nominal all-time high of $99.29 a barrel, the hawkish camp has found new ammunition to warn against backing a production increase amid doubts about the health of the US economy.
Michael Witter, of Société Générale in London, said that the last thing Opec wanted to do was increase output at the very time when the oil markets had become more concerned about fragile economic growth and weakening oil demand growth, especially in the US.
“Opec does not want to see a $10 a barrel correction turn into $20 a barrel bear market, as happened in late summer 2006 and December 2006,” Mr Witter said.
Developed economies’ central banks, under pressure to cut interest rates to cushion against the impact of the credit squeeze, have complained in recent weeks that their room of manoeuvre is limited by high oil and food prices.