Friday, October 7, 2011

With Crude Oil Below $100, OPEC Debates Price .


LONDON—A split between OPEC oil producers has resurfaced in recent days as economic risks and the return of Libyan output has sent oil prices under $100 a barrel and opened up a debate on just how low prices should go before OPEC takes action.

This week, the basket of average crude prices sold by members of the Organization of Petroleum Producing Countries and the Brent oil contract widely used by its clients both closed under $100 a barrel for the first time since February.

Some OPEC producers have begun to sound alarm bells on the weaker outlook and suggested the need for an emergency OPEC meeting if oil prices slip to $85 a barrel, or even $90 a barrel. But other members, including Saudi Arabia, have largely downplayed the recent price retreat and don't see the need for OPEC to respond. The OPEC daily price basket stood at $99.90 a barrel Wednesday, OPEC said Thursday morning.

Oil's Two-Day Gain: 9%
.Muhammad Ali Khatibi, the OPEC governor of Iran, said OPEC should consider an emergency meeting if prices continue to slip, while adding that it is still too early to seriously discuss an emergency meeting given current prices. OPEC is next scheduled to meet in Vienna Dec. 14.

"If there is a downward trend for a longer period, we should think about" an emergency meeting, Mr. Khatibi said. He declined to offer specific a "floor" price that should prompt a meeting.

But others are starting to put a firm floor on the price they will deem unacceptable. "Some OPEC member states have already started bilateral consultation on slipping oil prices," an Iraqi oil official said.

There are OPEC countries that "won't accept oil prices below $85 a barrel," he added, referring to an average of New York and London prices that currently stand at $92 a barrel. "If the price falls under $90, we will have to meet," an African OPEC delegate said, in reference to the Brent price which currently traded at about $102 a barrel Thursday.

Others, however, aren't impressed by the recent drop in prices, implying prices could fall somewhat further without arousing anxiety. OPEC member Kuwait is not worried about the drop in oil futures and sees no need for OPEC to take action as prices are still relatively high, a top Kuwait official said this week.

"The prices were previously too high, and they are still high today," said Imad al-Atiqi, a member of Kuwait's Supreme Petroleum Council.

The rift follows the battle lines drawn between two groups of producers at an acrimonious June meeting. One faction of Gulf producers led by Saudi Arabia pushed for a collective increase to make up for the loss of Libyan crude as it feared a looming crude shortage. Another group led by Iran successfully thwarted the move, arguing the economic recovery was too uncertain to justify more oil.

Saudi Arabia, which boosted output to make up for Libya, continues to pump at high levels and thinks any larger drops in oil prices would be short-lived.

Saudi Arabia "will cut back if market requires that, i.e. less demand for oil," one Saudi oil official said. The country is "currently still producing around 9.8 million barrels a day," compared to 8.5 million barrels a day in January before the Libyan crisis.

Write to Benoit Faucon at, Summer Said at and Hassan Hafidh at

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