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By Samuel R. Avro on Jan 14, 2009 with no responses

OPEC May Continue Cutting Production Until Prices Rise

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Venezuelan President Hugo Chavez said that he believes that OPEC is prepared to make further production cuts if necessary in order to prop up prices from their current levels.

“We will make the reductions that have to be made,” Chavez, whose country is a member of the Organization of Petroleum Exporting Countries, said during an address to Venezuela’s Congress. “I am sure what I am saying is what all the heads of government and heads of state think in all the OPEC countries.”

OPEC announced last month that it would be cutting 2.2 million barrels per day in an effort to cause a turnaround in the recent steep drop in crude oil prices.

Chavez said that the oil cartel would be prepared to make a cut of 4 million barrels per day if the low prices continue.

Meanwhile, the Qatar oil minister told reporters that his country sees $70 per barrel as a logical price for both investors and consumers.

“Low oil prices will reflect a freeze in investment in new resources. When growth comes back, we will have another shock, as resources will not be there to meet demand,” Abdullah al-Attiyah said on the sidelines of Petrotech, India’s biggest oil and gas conference. “$70 will be an incentive to companies and oil producers to keep investing. Oil prices over $100 are not logical. I also don’t appreciate low oil prices,” he said.

However, not everyone involved in the industry thinks that it’s right to force up the prices from their current levels during a global economic recession.

“They are making announcements of oil cuts in the hope that prices will go up, but they should understand the world economy needs a break from high oil prices,” Richard H. Jones, the deputy executive director of the International Energy Agency, told the Petrotech conference today. His agency advises 28 oil-importing countries on energy policy.

Crude oil futures have plummeted to below $40 a barrel since hitting a record high above $147 in July.

Saudi Arabia announced that it would cut production below the levels it is mandated to by the OPEC agreement.

The history of compliance with the oil cartel’s production caps among the group’s members have been shaky in the past, and the group’s secretary general, Abdalla El Badri, said that the organization will not know the full effect of the quota until mid-February. He said that he expects near 100% compliance with the agreed-upon quotas.