CAIRO, Egypt – Talk of cutting OPEC production grew stronger Wednesday after the oil minister of heavyweight Saudi Arabia indicated he was aware of the majority sentiment in favor of a reduction.
“Our objective is to keep the market balanced and keep it stable,” Saudi Oil Minister Ali Naimi said in Cairo, where the Organization of Petroleum Exporting Countries will meet on Friday.
Saudi Arabia produces nearly a third of OPEC’s total output of 30 million barrels a day. That total includes Iraq’s production of about 2 million barrels a day.
No amount of extra output from OPEC seemed to satisfy the world market for most of this year, but in recent weeks prices have dropped significantly from the summer highs of $50 a barrel.
Light sweet crude for January delivery rose 48 cents to $41.94 a barrel on the New York Mercantile Exchange. In London, Brent crude futures climbed 42 cents to $38.69 a barrel. Despite a sharp pullback recently, oil prices are about 30 percent higher than a year ago.
In his initial remarks to reporters on Wednesday, Naimi appeared to signal his country’s opposition to production cuts, saying he was satisfied with current OPEC output and not concerned about the most recent drop in prices.
“You guys forget – one year ago it was in the 20s, now it’s in the 40s, even Saudi crude is in the 30s,” he told reporters, talking in terms of dollars a barrel.
As for current OPEC output – which is about a million barrels a day more than the organization’s formal ceiling without Iraq – he said, “I’m happy with the way it is.”
He appeared to hedge later, however.
“We never meet without an objective, and when we have an objective, we take action,” he said.
His comments could signal that the Saudis are moving closer to Libya, Qatar, Kuwait, Iran and Venezuela, which are urging compliance with OPEC’s official quota of 27 million barrels a day as a way or stemming falling crude prices.
Oil analysts in Cairo suggested that OPEC sentiment for a cut appeared too strong to be ignored.
“My understanding is that they will cut back from overproduction, but quotas will stay the same,” said Diane Munro of Wood Mackenzie.
Joining those looking for cuts on Wednesday, Edmund Dakouro, Nigeria’s presidential adviser on petroleum and energy, said he wanted to a see “a signal to the market to stop a further fall.”
Dakouro said a good first step would be to OPEC members to stick to their current production quotas.
“This could mean a reduction of up to 1.5 million barrels a day,” Dakouro told Dow Jones Newswires.
Fathi bin Shatwan, Libya’s oil minister, said OPEC had two options at its Friday meeting: directly reduce actual production, or lower the official output ceiling.
Asked which of the two options he backed, Shatwan said, “I prefer both.”
By both pledging to refrain from quota busting and lowering the output ceiling, OPEC would send a strong message it aims to underpin crude oil prices.
“Either we comply with 27 million barrels a day or, if we think people won’t comply, we need a real reduction of 1 million barrels a day,” he said.