VIENNA – OPEC will keep its oil output near a 25-year high despite a $13 fall in the crude price since mid-July, ministers said on Monday, but the group left the door open to a supply cut before the end of the year.
Ministers said before the meeting they were unlikely to tamper with the 28 million barrels per day ceiling for now, with peak winter demand closing in and supply worries ever present.
For a year, OPEC has been pumping close to its fastest rate for 25 years to guard against price shocks and ease pressure on consumer economies. Prices have sunk from a record $78.40 a barrel on July 14 to a five-month low below $66 on Monday.
Saudi Oil Minister Ali Al-Naimi Naimi, OPEC's most influential voice, took the recent price fall in his stride.
"Market fundamentals are very sound," he told reporters.
"We are beginning to see a slight decrease in economic growth, very slight...It is nothing alarming."
Forecasts that demand for OPEC oil will decline in 2007 are worrying some in the group that pumps a third of the world's crude. OPEC empowered the group's president, Nigeria's oil minister Edmund Daukoru, to call an extraordinary meeting before the next scheduled gathering in December if needed.
"We have been producing more or less regardless of the call on OPEC," Daukoru said ahead of the talks.
But OPEC saw no need for an immediate production cut -- oil is still up $5 this year and three times the price at the start of 2002, the beginning of a four and a half year rally.
Ministers are mindful that the Atlantic hurricane season still has several weeks to run and U.S. Gulf of Mexico oil output has yet to recover fully from last year's storms.
Iran's disagreement with the United Nations Security Council over its uranium enrichment programme also has the potential to drive prices higher. The United States favours sanctions against the world's fourth biggest oil exporter.
A quarter of Nigeria's oil output lies idle because of militant attacks and Iraq's exports are vulnerable to sabotage.
"This business is very tricky. When prices come down investors start thinking, should we build additional capacity? This business is a long term investment business so don't think these blips are significant. Look at it long term," Naimi said.
Iranian Oil Minister Kazem Vaziri said he wanted to see OPEC's basket of crudes holding above $60 a barrel, which would equate to U.S. crude above $64.
SLOWING DEMAND GROWTH
Surging oil prices boosted the value of OPEC's crude oil exports by 45 percent to a record $513 billion last year.
But there are signs that economic activity is easing in top consumer the United States and the second biggest consumer China has raised lending rates to try to cool its economy.
OPEC's economists are forecasting demand for OPEC oil will drop 800,000 barrels per day to an average 28.3 million barrels per day in 2007 as new non-OPEC production comes onstream.
The latest U.S. car sales data show increasing numbers of U.S. drivers are trading in their sports utility vehicles for smaller, more fuel efficient cars.
Carl Calabro of PFC Energy in Washington said the real test for the organization may come early next year.
"The concern is what happens to the price in spring when demand falls. World inventories are quite adequate at the present time," he said.
Citigroup analysts said the recent steep price drop had changed OPEC's focus.
"We would argue that the debate for the cartel has shifted from one of defining current market supply-demand balances, to one of identifying a price level which the group as a whole would be keen to defend," they wrote in a research note.