Saudis imply OPEC will hold production steady

updated 6:42 p.m. ET Sept. 9, 2008

VIENNA, Austria - OPEC oil ministers will likely decide to keep output at present levels, the group’s president said Tuesday, suggesting that most members could accept prices at $100 a barrel.

Ministers of the 13-nation organization are expected to make a formal decision late in the day or early Wednesday on what to do about production amid rapidly falling prices.

Oil prices closed below $104 a barrel Tuesday, a 30 percent decline from July.

OPEC President Chakib Khelil suggested most members would rather accept lower-priced crude than see a broader destruction of demand that has occurred over the last several months as oil set one price record after another.

“We will probably stay at the (present) level,” Khelil told reporters.

Amid expectations that OPEC would leave production unchanged, oil prices dropped below $104 a barrel Tuesday, even before the comments by Khelil, who is also Algeria’s oil minister. The belief that Hurricane Ike would miss critical Gulf Coast oil installations dropped crude prices to $103.26 per barrel on the New York Mercantile Exchange, the lowest settlement price since April 1. Prices dipped as low as $102.20 Tuesday.

Support for maintaining current production levels has been building, with OPEC powerhouse Saudi Arabia suggesting the ministers would opt against cutting back.

“The market is fairly well-balanced,” Oil Minister Ali Naimi told reporters. “I think things are in balance, in a healthy position.”

Naimi, whose country accounts for about a third of OPEC production, appeared to rebut calls for a cutback from Iran, OPEC’s No. 2 producer and a traditional OPEC price hawk.

Other OPEC ministers have been less strident in calling for a tightening of the oil spigots, despite oil’s fall from $147 a barrel in July. OPEC nations account for two-thirds of the world’s known oil reserves, and about 40 percent of the world’s oil production, affording them considerable control over the global market.

Venezuela is also normally among those backing higher prices. But on Tuesday Venezuelan Oil Minister Rafael D. Ramirez said there was no immediate need to lower production — even while warning of a likely oversupply by year’s end.

“We think we can keep ... current output levels,” he told reporters. Still, he suggested that OPEC would have to consider cutting back in the coming months, saying the organization estimated that demand would fall by close to 1 million barrels by December.

That, and present overproduction of 1 million to 1.5 million barrels a day, means “we need an action plan from here to December to keep the market balanced,” he said.

Mohammed Abdullah Al-Aleem — Kuwait’s oil minister and a member of an OPEC committee whose recommendations could influence OPEC’s final decision about output — also said there is no need for OPEC to cut production “for the time being.”

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