Azerbaijan, Baku, 27 November / Trend corr. A.Badalova/ The OPEC-member countries will hold an informal meeting in Cairo on 29 November to develop measures to control further price cut.
The OPEC-member countries made decision at the last extraordinary meeting, which was held in Vienna on 24 October, to reduce oil production by 1.5mln barrels a day on 1 November. Earlier it was planned that the next meeting of the Oil Ministers of the OPEC-member countries will take place in Algeria on 17 December.
Although there are clearly benefits from announcing an output early cut, the probable outcome from the Cairo meeting will be a clear message that supply will be cut Algeria, said Lawrence Eagles, an analyst of JPMorgan bank, which is the third bank of the world on size.
There are several reasons to suppose that a decision will not be made on reduction of production at a meeting of OPEC in Cairo, Eagles told Trend via e-mail.
First, there is no clear indication of current levels of compliance - further cut would muddy the water.
Members of OPEC do not hold the same opinion on necessity to reduce quota on production. Thus, Nigeria stated that it does not intend to lose return under conditions of the financial crisis and does not agree with cut of production. Iran and Kuwait support to cut production.
Moreover, any new cut would be difficult to implement before January 1, so there would be little point in an early announcement, Eagles said.
Eagles believes that it would be politically negative: there would be accusations by consumers that OPEC would be ramping up the price in the midst of a world recession.
Producers would be better off with a lower oil price that helps stimulate world economic growth than a higher price which postpones recession, Eagles said.
Finally, pushing the price higher now might encourage fuel efficiency measures at a time when consumers are benefiting from lower oil prices, he said.
The meeting of the OPEC-member countries will not lead to any changes in amount of oil production, because first, it is necessary to be sure that the earlier made decision on its cut has been fulfilled, Shakib Halil, the OPEC President said. A major decision can be made at a meeting in Algeria, he said.
However, Eagles said that there are some reasons, which make us think of the contrary.
"Why should the ministers of non-OAPEC countries travel all the way to Cairo just to talk?" Eagles believe.
Another reason of unexpected outcome may be price floor of $50.
"Moreover, not acting could see the price fall a lot further before the December 17," Eagles said.
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