OPEC Concerned about Rapidly Falling Oil Prices, Says Western Expert
Azerbaijan, Baku, 17 October / Trend corr. A.Badalova/ OPEC special meeting scheduled to take place in Vienna on 18 November has been postponed to 24 October. Bringing forward the meeting resulted from consultations between OPEC President and organization's high-ranking figures, OPEC said in a statement placed on its official website.
According to Lawrence Eagles, an analyst of the world's third largest bank - US JPMorgan, bringing forward the meeting to Friday 24th October sends a clear signal that OPEC is concerned about the speed with which oil prices are slipping away from a preferred price of around $80/bbl.
"OPEC, having taken a rather prosaic market view by plumping for an emergency meeting just after the US Presidential election, are now facing up to the realities of a plunging oil price and the growing realization that the world economy is already in recession," Eagles said to Trend via e-mail on 17 October.
Price of November futures at the London Exchange fell by $4.48 to $66.32/bbl. Price of November futures for US WTI oil fell at the New York Exchange by $4.69 to $68.57/bbl.
OPEC plans to discuss at the upcoming special meeting the impact of global financial crisis on oil prices. The cartel intends to consider reduction of oil production so that to maintain price stability.
OPEC President Chakib Khelil, also Algeria's Minister of Energy and Mines, said recently that $70-$90/bbl is the ideal price for oil.
"OPEC has decided to take action, but what that action will be will be decided through intense telephone discussions between now and the meeting. Indeed, action is already underway to cut output, with Saudi Arabia on the road to returning to quota in November. That takes 500 kb/d out of the market. But if it wants to have an impact on prices OPEC will have to do more. But how much? Our own balances suggest that an output cut of 500 kb/d on top of Saudi adjustments in progress may be enough," said Eagles.
"What OPEC has done by bringing forward this meeting is to send a message that it does not want to see prices slip below $70/bbl and is more comfortable with prices around $80/bbl. It will signal that it is watching the market closely and will take additional action, if and when necessary," he said.
"We continue to believe that the (internally hated) price band mechanism offers the best way for OPEC to manage the market under current conditions. Re-introducing that, with a band of $70-90 would be a monumental break from conventional wisdom, but would guard against an over-tightening of the market," he said.
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