TEHRAN (FNA)- Pressure for a cut in oil output at next week’s OPEC meeting in Vienna stepped up today when Iran’s OPEC governor said an oil price of $100 per barrel was “appropriate” in current conditions.
Mohammad Ali Khatibi made his comments as the price of Brent crude fell by $1.77 to $104.30 today while US oil also declined to $106.12. Oil is now trading nearly 30 per cent lower than its peak of $147.27 on July 11.
Khatibi also reiterated Iran’s view that OPEC’s 13 members, who are responsible for 40 per cent of the world’s oil, should cut output to their agreed targets so that oversupply on the market was reduced.
Oil market analysts expect OPEC producers to vigorously protect the $100 a barrel price at next week’s meeting against a backdrop of rapidly falling crude prices and the strengthening dollar.
Crude oil prices are now at a five-month low and could yet fall through the $100 a barrel level, first breached at the beginning of this year.
“Continuing worries about the international economic outlook, a firmer US dollar and, possibly, market speculation that OPEC may not move production levels following next week’s OPEC meeting left oil prices softer,” David Moore, commodity strategist at Commonwealth Bank of Australia, said.
Demand for oil in the US has already fallen back by between 7 per cent and 10 per cent, in reaction to record high gas prices and because of the country’s troubled economy.
Predictions earlier this week that the world’s leading economies were at a standstill and that the UK could be in recession by the end of the year have heightened concerns that global demand for oil will fall back, sending prices plunging.
Robert Laughlin, analyst at MF Global, said today that OPEC had played a good hand in its actions – or lack of them – this year, when prices rose aggressively. “But (they) will be alarmed at the downturn in demand and the deteriorating economic backdrop of the global economy.”
“Western leaders will be urging the cartel to remain unchanged in production strategy but I fear there is growing feeling in the ranks of price hawks that a cut in production is required and now,” Mr. Laughlin said.
At the moment OPEC remains split on production cuts. Venezuela has led demands for cuts but Ecuador’s oil minister, Galo Chiriboga, has said that output levels should remain unchanged.
Iran has said the producer group may need to cut oil supplies by as much as 1.5 million barrels per day, or nearly 5 per cent, to balance global markets by early next year.
Even the most moderate OPEC member, Saudi Arabia, which has indicated that it would prefer output to be left unchanged, has been cutting the discount at which it sells Arab heavy, a poor-quality crude that it uses to calm the oil price, offering large quantities at big discounts.