CAIRO, Egypt – OPEC ended a hastily convened meeting in Cairo Saturday without announcing new output cuts, despite the steep drop in crude prices and the threat it poses to member governments' national budgets.
The oil producing group's president, Chakib Khelil, said OPEC is concerned about the weakening world economy and its impact on oil prices. The group, however, will likely wait until a meeting in Algeria on Dec. 17 to decide whether to cut additional crude supplies from the market.
Khelil said oil ministers of the Organization of Petroleum Exporting Countries "agreed to take any additional action on 17th of December to balance oil supply and demand and achieve market stability."
His comments came after the group convened what it called a consultative meeting in Cairo to take stock of market situations and to asses whether members were complying with a 1.5 million barrel per day output cut announced Oct. 24 in Vienna, Austria.
Khelil said preliminary market data indicated members were complying with the earlier cuts.
Saudi Arabia's king said in an interview published Saturday in a Kuwaiti newspaper that the price of oil should be $75 a barrel, much higher than it is now, but the conclusion of the Cairo meeting with no announcement on output indicated no measures would likely be taken until OPEC meets again next month.
Saudi Oil Minister Ali Naimi went into Saturday's meeting saying OPEC would "do what needs to be done" to shore up falling oil prices when the group meets in Algeria, but for now it was "too early."
Naimi, whose country is the world's largest oil producer, said the bloc needs to wait until the Algeria meeting to assess the impact of earlier production cuts.
The cut announced in Vienna has so far failed to stop the price drop, and the cartel abruptly convened the Cairo gathering on the sidelines of the Organization of Arab Petroleum Exporting Countries' meeting.
The price of crude stood at about $147 a barrel in mid-July. On Friday, the U.S. benchmark West Texas Intermediate crude for January delivery was trading at about $54 per barrel.
The price drop and the wider financial meltdown threatens to cut deeply into OPEC member states' government budgets.
"We believe the fair price for oil is $75 a barrel," Saudi King Abdullah was quoted as saying in Saturday's edition of the Kuwaiti newspaper Al-Seyassah. He did not say how the price could be raised.
"The price between 70 to 80 (dollars a barrel) is the one encouraging in investment and developing new or current oil fields," he said. "It falls below 70 (dollars), the investment would freeze, which will lead to a crisis in supply in the future."
Nigerian Oil Minister Odein Ajumogobia also said they would be "very happy" with oil at $75.
Kuwait's oil minister, Mohammed al-Aleem, warned the market is oversupplied, and he didn't rule out the need for OPEC to cut production further. But he, too, said he believed there was no need for OPEC to make a decision in Cairo on cutting output.
"We believe a decision could be taken ... but I think it will happen in Algeria," he said, before the start of Saturday's session.
Al-Aleem said current prices could undercut investment in future projects and were not good for either producers or consumers.
The recent price drop has left OPEC price hawks Venezuela and Iran clamoring for further reductions of at least 1 million barrels a day. Both countries need crude at about $90 per barrel to meet spending needs aimed in part at propping up domestically unpopular regimes.
The Saudis are better positioned to cope with the drop in prices. The International Monetary Fund estimates Riyadh needs crude in the range of about $50 per barrel for 2008 fiscal accounts to break even.
The statements by the king, however, indicate that normally dovish Saudi Arabia is ready to see the price rise, indicating cuts will eventually take place.
OPEC itself, along with the International Energy Agency, has significantly revised down its projections for demand growth in 2009.
Meanwhile, global crude inventories are growing, as evidenced by a U.S. government report showing a surprisingly large 7 million barrel build in stocks last week in the world's largest energy consumer.
OPEC's last round of cuts would put its total production at about 30.5 million barrels per day, according to the IEA. That is about 500,000 barrels per day higher than the forecast call on OPEC crude in much of 2009.
A Nov. 24 New York-based Oppenheimer & Co. research report says that for oil to rebound to $65 a barrel, OPEC would need to cut crude production by more than 3 million barrels per day from its September levels — a move it called highly unlikely.