OPEC's secretary general said he expected the group to lower its oil output target when it meets in late November, which would be its first formal output cut since the 2008 financial crisis.
Continue Reading Below
Abdullah al-Badri was speaking after meeting Russian Energy Minister Alexander Novak on Tuesday. Oil dropped below OPEC's preferred level of $100 a barrel last week, which also marks the pain threshold for top world oil producer Russia's faltering economy.
Badri was asked if OPEC's 30 million barrels per day output target would still be appropriate next year, when OPEC forecasts lower demand for its crude due to rising supplies from the United States and other countries outside the group.
"No, I don't think so," he said. "I think our production will be maybe 29.5 in 2015, not 30 million barrels per day. I think our target will be lower, maybe by 500,000."
Analysts saw the comments as a sign that some in OPEC are becoming concerned.
"It's a signal and it is quite significant," said analyst Samuel Cizsuk of the Swedish Energy Agency. "It is likely that some of the OPEC members will be fretting a bit about potentially lower prices."
Continue Reading Below
OPEC meets on Nov. 27 to review its oil output policy.
Novak said, however, that he did not discuss coordinating output policy in his meeting with Badri, which had been long scheduled.
Benchmark Brent crude fell to a 26-month low on Monday to under $97 after a sharply lower rate of factory output growth in China, the world's biggest energy consumer, sent shivers through the oil market. Brent regained some ground to reach $99 on Tuesday. [O/R]
Prices had already weakened as reviving oil output from Libya added to supply bloated by U.S. production at its highest since 1986 thanks to the shale boom, and on weakening demand.
OPEC member Libya's climb back to around 1 million bpd of output, despite political uncertainty and conflict there, further soothed consuming nations relieved that turmoil in Iraq, OPEC's second largest producer behind Saudi Arabia, had failed to lower output there significantly.
Saudi Arabia, alone in OPEC with significant capacity to make up for shortfalls, has said it cut its output by 400,000 bpd in August to around 9.6 million bpd as the immediate supply worry appeared to ease. OPEC itself has cut back its projection of demand for its oil.
The oil market is accustomed to calibrations in Saudi oil output while the 30 million bpd OPEC target has remained untouched since it was introduced in 2012. Before then, OPEC had not changed its output target since it made a record cut in supplies in December 2008.
"In the near-term we are very likely to see a further pullback of production by Saudi Arabia to balance the market in Q4, probably around 500,000 bpd but calibrated to events in Libya," said Greg Priddy of analysts Eurasia Group in a note.
OPEC's Badri, usually slow to speculate on OPEC policy ahead of formal meetings, played down the price drop.
"Everybody knows that the price is declining now for the last two months, I don't think this trend will continue. We are predicting that (the) price will come up by the end of the year," Badri said.
"I have seen a lot of oil prices coming up or down and I think this is a fluctuation of seasonal behavior."
Russia has had an uneasy relationship with OPEC. A diplomatic dance around possible oil output cooperation failed to produce significant concrete results, even after the oil price collapse of 2008. OPEC said on Tuesday a further meeting would be held in Moscow in the second half of next year.
Badri said Tuesday's talks had covered broad market topics and taken in a long term perspective, showing continued thawing in the relationship.
"For the last three years we've been progressing very well," Badri told Reuters. "I don't want to talk about the past, the past is past."