Crude slips as Opec delays decision
Posted:01 December 2008
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Crude oil slipped once again as Opec deferred yet again their decision to reduce output this week.
As the price of oil fell to $53 a barrel, Opec stated that the reason behind the decision was a reduction in global demand as news broke that some two million barrels oversupply the global oil market.
As the oil price continues to falter, the cartel delayed their expected decision and agreed to reconvene in Algeria on December 17.
"Market assessments indicate that the market has around two million barrels per day of oversupply," Iran's oil minister, Gholamhossein Nozari, said this week. "In Algeria we will have to make a decision to establish balance between supply and demand."
Several Opec members have been applying pressure to apply further restrictions in order to strengthen prices. Although up until now, this has been to no avail.
Saudi Arabia has been one of the vocal members of the group, and believes that supplies need to be cut by between 1 – 1.5 million barrels on top of existing reductions of two million barrels.
Interestingly, the Saudi Arabians have indicated that, in their belief, $75 a barrel is a fair price and that in the short term the price doesn’t look achievable.
"Given the fractious nature of Opec on quota compliance, they may have some problems," Raja Kiwan, of consultants PFC Energy, said last week.
Analysts firmly believe that Opec need to make substantial cuts, especially given that demand will fall in 2009 – the first time in over two decades.
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