Create a free Manufacturing.net account to continue

OPEC Ready For More Oil Production Cuts

OPEC hopes government stimulus packages in big consumer nations such as the U.S. will make global oil demand pick up, but is ready to make cuts if it doesn't.

DAVOS, Switzerland (AP) -- OPEC is readying to make further production cuts if prices don't rise in the coming weeks, its secretary-general said Thursday.

Consumer nations, though, urged the group to be careful to not let prices get too high.

OPEC's Abdalla Salem El-Badri, speaking at the World Economic Forum in Davos, said he hoped that government stimulus packages in big consumer nations such as the U.S. would make global oil demand pick up "by the end of this year or beginning of next year."

El-Badri insisted that OPEC members will have reached the group's pledge of a drop of 4.2 million barrels a day by the end of January.

After that threshold is reached, he said, "We have to review these numbers and see how the market will react."

"If we still have some downward problems, then OPEC will not hesitate to take some quantity out of the market," he said.

He stressed the reductions should not be so deep that oil producers can't keep up with demand once it rises again. "We have to be ready to satisfy this demand."

In December, the Organization of Petroleum Exporting Countries announced a 2.2 million barrel production cut aimed at shoring up prices that have plummeted from mid-July highs of nearly $150 per barrel. The cuts came on top of another 2 million production cut instituted in the last quarter of 2008.

But economic troubles and shrinking demand have meant that the reductions have failed to provide lasting support to prices. Oil prices dipped below $42 a barrel Thursday as rising U.S. crude inventories offset expectations a massive U.S. stimulus package will revive growth and consumer demand.

El-Badri said oil producers need "a reasonable price," preferably higher than $50, to afford investment in the industry.

Mukesh Ambani, chairman of Reliance Industries, India's biggest private enterprise, said oil producers need to help ensure that prices don't get out of control.

"Demand is going to come from developing countries, where affordability is critical," he said.

"What worries us in the developing world is the volatility of prices," he added. "All 6 billion people have a stake in the energy industry."

The CEO of British Petroleum, Tony Hayward, said oil prices will depend on how fast countries emerge from the economic crisis.

In the meantime, he said paying more attention to alternative energy would provide the stability consumer countries are seeking.

Putting a worldwide market price on carbon emissions will make "vast numbers of alternative energy sources ... competitive," he said. "And we will solve the world's energy problems."

More in Supply Chain