OPEC is set to agree a production cut of up to 2 million barrels per day (bpd) this week to boost slumping prices, but could discuss phasing the reduction, OPEC president Chakib Khelil told AFP Saturday.
Some OPEC members were pushing for more than that, but the consensus was gathering for "at least" 1.5 million bpd, amid concerned of a "dramatic" price collapse if the cartel fails to act decisively.
"I believe that the position will be between 1.5 and 2 million barrels per day," said Khelil, Algeria's oil minister, in an interview ahead of the January 17 ministerial meeting.
Wednesday's meeting would also discuss how to implement the cut, he said. "Will it be from February 1 or a date after that? Will it be in one go or in a number of phases. All that is up for discussion," he said.
The 11-member oil-producing Organization of Petroleum Exporting Countries (OPEC) increased its production four times last year to ease prices which soared to 10-year highs of more than $35 (€37) a barrel.
But prices have slumped rapidly in recent weeks, to below $22 a barrel, sparking alarm about a slump in prices similar to that in 1998, when crude dipped to below $10 a barrel.
Khelil said US Energy Secretary Bill Richardson, whom he met in Paris on Friday, had pushed for a production cut of 1 million barrels per day, but not all at once.
But he appeared cool on this proposal, noting the risk of a serious price collapse if OPEC does not act decisively.
"We could go bit by bit ... but if there is a dramatic collapse it would be difficult to find a consensus" among OPEC members about how to react, he said, noting continuing fears of a proce collapse in the second quarter.
Oil market analysts have widely forecast a cut of 1.5 million barrels, and Khelil said the accord was likely to be "at least" that amount.
He referred to one "extreme" call for a cut of more than 2 million barrels, but played down its impact on the consensus agreement the cartel will reach on Wednesday.
Iran and Iraq have been the most hawkish in calling for big cuts.
Iraqi Oil Minister Amer Rashid called Saturday for an output drop of two million bpd this week, and then a further 1 million at OPEC's next scheduled meeting in March.
Further ahead, Khelil said there was a risk that prices will rebound in the third and fourth quarters of 2001, as demand increases again ahead of the northern hemisphere's winter.
In the second half of the year "we risk having the same problem but the other way, that prices head upwards again," he said.
He was confident however there would be no repeat of last year, when soaring prices led to petrol scares in some European countries. "I don't think we will have another crisis like we had last summer," he said.
Khelil, who took over the OPEC presidency on January 1, said the organisation was all too aware of the risk of repeat of 1998. "We got burnt once. We don't want to repeat the same scenario," he said.
The Algerian minister said it was possible, but unlikely, that the OPEC ministers would call another meeting before March to decide on further cuts in production if necessary.
"It would surprise me, but it is always possible," he said.
The minister, who succeeded Venezuela's Ali Rodriguez as OPEC president, meanwhile insisted that a $22-28 a barrel price-band mechanism agreed last March remained a useful tool, although he admitted its deficiencies.
"It functions as a kind of alarm bell. The mechanism has worked and it remains in place," he said, while admitting: "At first we thought the mechanism would solve everything.
"But then it became apparent that it only reflects price, and price isn't the only variable ... It doesn't prevent us from analysing the other parameters," he said. – (Vienna, AFP)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
