Boston Globe - 12/10/2006
Oil prices fell to their lowest level this year yesterday as doubts grew there is a consensus within OPEC for an immediate output cut.
Since July, the cost of crude oil has plunged by more than $20 amid rising global inventories, concerns about slowing economic growth, and a milder-than-anticipated hurricane season.
Against this backdrop, the president of the Organization of Petroleum Exporting Countries, Nigerian oil minister Edmund Daukoru, says there is a need -- and an agreement -- to cut production by 1 million barrels a day starting next month.
But Saudi Arabia, the country whose participation is necessary to make any significant output reduction, has not publicly confirmed this.
``The market just doesn't believe" a supply cut is imminent, said Societe Generale's director of commodity strategy Michael Guido.
Indeed, OPEC members appear to be divided over what is an appropriate price level for the cartel to try and defend by reducing its output, analysts said.
Price hawks within OPEC, such as Venezuela and Nigeria, have made it very clear over the past week that they are quite satisfied with world oil prices hovering around $60 a barrel.
Saudi Arabia, on the other hand, has made it known -- by remaining mostly silent -- that it is not interested in attempting to prop up prices just yet.
The country's ambassador to the United States, Turki al-Faisal, said last week that Saudi Arabia seeks a ``reasonable level" for oil prices that will not hurt global economic growth.
Analysts said the discrepancy among OPEC members about what constitutes a fair price for oil also relates to each country's dependence on oil revenues to finance their domestic budgets.
``One of the problems with high oil prices is that they have made some countries believe they're entitled to that level," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation, a New York industry financed think tank.
Light sweet crude for November delivery fell by 93 cents to settle at $57.59 a barrel on the New York Mercantile Exchange -- the lowest settlement since Dec. 19.
The last time OPEC trimmed its output was December 2004 when oil traded slightly above $40 a barrel. That caused an immediate spike in prices.