RIYADH, Jan 13: With stocks piling up and prices crumbling crude markets are under severe pressure. Prices have touched their lowest mark in almost 18 months now - $9 slide in oil prices in just the past two weeks.

A 14 per cent slide has been registered in crude prices since the beginning of the year. Crude producers are looking at the developments wearily, keeping close vigil on the developments. And the oil cartel, Opec is mulling various measures to counter the abrupt slide.

The current market weakness is attributed to a number of factors. The US is the largest crude market in the world, consuming about 25 per cent of the world total and any changes in the US definitely affect the markets.

Rising stocks in the US have played a role in dampening market sentiments. The US government data released late last week showed a two million barrel rise in distillate stocks, including heating oil, generating a ripple effect in the already disturbed crude markets.

Petroleum stocks were also reported to have risen by a hefty 5.6 million barrels, much more than the 1.5 million barrels forecast by analysts earlier, overshadowing a 1.3 million barrel fall in crude stocks. The unexpected mild weather in the US Northeast, the top heating oil consumer region, and also in Europe, has undercut demand for fuel, putting downward pressure on prices.

Demand pessimism also seems to be bearing heavily on the overall supply demand equation. “Weather is certainly a key driver of sentiment, but what has been set in motion is far more general demand pessimism for the year ahead,” Barclays Capital said in a report.

And Opec is keeping a weary eye on all these developments. The oil cartel is widely believed to be defending an undeclared target of $60 a barrel for US crude.

After all the consequences for such a sharp drop in prices for the oil dependent economies of most of the oil producing countries, could easily be termed as painful. Several steps hence are in offing now.

If these prices persist or there is a continued decline on the horizon, then the group would consider meeting," Hossein Kazempur Ardebili, Iran's governor to Opec told Dow Jones Newswires. However, no time frame for the proposed meeting was suggested.

On Monday, the Venezuelan Oil Minister Rafael Ramirez also called for an emergency meeting of the cartel ahead of the group’s scheduled March 15 session to discuss (the falling) prices.

Opec president Mohammed al-Hamli is now reportedly holding “intensive” consultations with member states “over phone” on further action to stem the sharp drop in oil prices.

Hints of more actions, to stem the rot as some say, are already there to be taken note of. Some Opec members are already mulling cancellation of capacity expansion projects, currently underway or on the drawing boards.

Kuwait Oil Minister Ali Jarrah al-Sabah was quoted as saying earlier the week, “We will have to cancel projects if prices continue to fall. Falling prices will damage our economies.” The ten members of the group adhering to production quotas within the Opec, including Saudi Arabia, the UAE and Qatar, plan projects worth $100 billion to boost daily crude output capacity.

Saudi Arabian Monetary Agency’s boss, while in Basel, also emphasized on the negative impact of the falling oil prices on the oil producing economies of the Gulf.

Some industry sources, however, have a feeling that geopolitical tensions in the oil producing region would prevent prices from staying below $60 mark for too long. And they had reasons for this optimism – or pessimism – if one looks at it from the other side of the fence.

Tensions seem to keep stoking the fire. When Russian temporarily halted crude supplies through a pipeline that met a fifth of demand from Europe's largest economy Germany, prices reacted positively.

Russian crude supplies through the 1.8 million barrels per day (bpd) Druzhba (friendship) pipeline to Poland and Germany was stopped overnight. Russia is the world's second largest exporter and about two-fifths of its shipments go through the line.

And in the meantime, to firm up the markets in the immediate term, Saudi Arabia is also planning to reduce supplies to Asia by 12 to 14 per cent in February - the most in two years, a Bloomberg news survey of six refiners in Asia reported

According to Reuters news agency, Saudi Arabia intends to cut crude output by 158,000 bpd from February 1, in line with Opec's latest production cut. It was reported that the kingdom's total cut, including curbs in November, would equal 538,000 bpd. That would take Saudi supplies to 8.5 million bpd from February.

However, despite the Saudi adherence to the output cut, the Opec was still faced with its perennial problem of quota busting. A Reuter’s survey vividly indicated that Opec had made little further progress in December in lowering supply to bolster prices. Higher output from some members offset cutbacks by Saudi Arabia and others.

Supply from the 10 countries bound by output targets was 26.96 million bpd in December, up 60,000 bpd from November, the survey found. December supply was 680,000 bpd less than in October, just over half the cut Opec pledged from November 1.

After all, officially Riyadh is still not ready to assume the role of swing producer within Opec. And if Saudi Arabia, the Opec king pin decides it is too much for it to bear, it has the most capacity and tenacity to disrupt the market for a short time forcing others to either behave or opt out, before restoring sanity back to the markets.

Other players may not like the idea, yet it is not too far fetched in the given circumstances, one has to underline.