VIENNA, March 27: The Organization of Petroleum Exporting Countries (Opec) could move rapidly to reduce production of crude if the price falls below $22 a barrel, a source close to the organization said here on Thursday, on condition of anonymity.
“If the price of a barrel drops under $22, below the price band, the ministers will not wait until their next meeting in Doha for considering a reduction of production,” the source said.
“Despite the ongoing war in Iraq, we feel there is enough oil on the market. We even feel there might be too much.”
Oil producers feared the arrival of warmer weather in the northern hemisphere could lead to over-supply and hit prices, the source added.
“With the summer season, we fear that demand will drop. Prices might rebound — it will largely depend on the ongoing military operations in Iraq.”
The comments came one week after Opec Secretary General Alvaro Silva Calderon reiterated the cartel’s pledge to make good any oil shortage arising from the Iraq conflict, if necessary by increasing production.
Calderon said Opec was facing an “emergency situation, and for that reason we have to use spare capacity if it is necessary”.
Opec’s stated target is to maintain oil prices within a range of $22-28 a barrel.
The source said oil investors are keeping a close watch on developments in Nigeria, where ethnic tension has for 10 days been threatening the oil industry of the biggest African producer.
More than 800,000 barrels has been slashed from Nigeria’s daily oil production, more than a third of its exports, in the two weeks since an uprising by the Ijaw ethnic group triggered bloody clashes in the Niger Delta.
Nigeria is the world’s sixth largest exporter of crude oil, with an Opec quota of 2.018 million bpd.
The source admitted that “some people” had thought of using oil as a “weapon” in solidarity with Iraq, but he said this would not happen.
“Some people have raised this possibility,” he said, “but if this weapon were to be used, for example as a boycott of the United States or Britain, it could backfire on those using it” by destabilizing the market.
Opec has scheduled an extraordinary ministerial meeting in Doha, Qatar on June 11.—AFP