Opec defers drop in production to study impact of earlier cuts

The Organisation of Petroleum Exporting Countries (Opec) deferred a decision on reducing production this year by two weeks to gauge the impact of earlier cuts, as it seeks to push oil prices back up to $75 a barrel.

This follows a suggestion by Saudi Arabia that the "fair price" of oil should be $75 per barrel. The Saudi oil minister said there was a "good logic" for $75-a-barrel, backing earlier comments from The Custodian of Two Holy mosques King Abdullah bin Abdulaziz of Saudi Arabia, who said that this represents a "fair price".

Crude has dropped 62 per cent from July's record of $147.27 a barrel as the global recession erodes sales.

Ali Al Naimi, Oil Minister of Saudi Arabia, Opec's largest exporter, said on Saturday that $75 a barrel represents a "fair price" needed to support investment in new fields.

Opec, which accounts for more than 40 per cent of the world's supply, will next meet in Oran, Algeria, on December 17. In a statement after yesterday's meeting in Cairo, the group warned demand will be "much lower" than expected a month ago. The cost of crude has continued to slide even after the group agreed last month to lower production by 1.5 million barrels a day.

"The way demand data continues to come out, especially from the US, suggests that they will have to cut," said Raja Kiwan, a Dubai-based analyst at consultant PFC Energy.

Compliance with existing supply quotas is "not good enough", based on current forecasts, said Opec Secretary General Abdalla El Badri. He also urged non-Opec members Russia, Mexico and Norway to restrain supply, as they did a decade ago when prices slumped toward $10 a barrel.

The 11 Opec states subject to output quotas will produce 27.8 million barrels a day in November, according to Geneva- based consultant PetroLogistics, in excess of their official limit of 27.3 million barrels a day.

Opec pledged to take any "additional action" needed to stabilise the market in Oran, according to Chakib Khelil, the group's president. Asked if Opec would seek to lower output in Algeria, Al Naimi replied: "A cut is possible, we will have to see." A reduction would not be needed if members achieve 80 per cent compliance with last month's agreed cuts. Opec abandoned an official price target almost four years ago and ministers' expectations have changed throughout 2008 as crude rallied to a record near $150 in New York in July, then fell below $50 in November.

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