PARIS, Oct 26: Opec faces two key dates in the next two weeks in its fight to stop the present slide in oil prices, amid warnings that if it does not get help from non-Opec producers a disastrous price war could result.
On Monday, a meeting is to be held between experts from non-Opec and Opec countries at Opec’s headquarters in Vienna in which the price of oil is expected to dominate the agenda.
Non-Opec countries attending know they will have their arms twisted to take part in joint action with the Organisation of Petroleum Exporting Countries.
It will be followed by a long-scheduled meeting of Opec oil ministers on November 14, where a decision on production cuts could be taken.
Oil prices have fallen by around 20 per cent since the September 11 attacks on the United States.
So far members have shied away from production cuts, partly because Muslim states do not want to be seen as putting their own economic interest ahead of concerns for the global economy at this delicate time.
Venezuela’s President Hugo Chavez has been making a tour of Opec and non-Opec countries to sound them out on concerted production cuts to boost the oil price.
He has met with a marked lack of enthusiasm, especially from Russia and Norway, so the carrot of higher prices may be replaced by the stick of a risk of a flood of oil on the market.
Chavez said during the London leg of his tour that if Opec “opened the valves,” the oil price could fall as low as five dollars a barrel. It is currently around 21 dollars a barrel.
Fresh in the memory of oil producing states is the oil price crisis of 1998-1999, when prices dropped below 10 dollars a barrel after the Asian economic crisis.
A key factor in the oil market then, was the lack of discipline in Opec states over production levels, with Venezuela being cited as a major offender.
Opec members argued then that cutting production would not have any effect on prices because non-Opec members would simply increase production — the same arguments as are being heard now.
Eventually Saudi Arabia, the world’s biggest oil exporting nation, lost patience and increased its own production, causing prices to tumble.
Already there are signs that the message is getting through.
“Taking the improved compliance and the possibility of non-Opec co-operation together is possible to envisage a very positive scenario developing,” said Lawrence Eagles, an expert at the London-based GNI brokerage.
“Certainly in non-Opec producers consider a cut, then Opec would too, and the oil market could tighten considerably,” he said.
“However for that to be achieved there would have to be an agreement with Russia to freeze exports.”
On Monday, Russia ruled out an immediate cutback to its soaring oil production.—AFP
