OPEC nations split on supply cut issue

The Organization of Petroleum Exporting Countries (OPEC) has not yet reached on a decision of further cut in the oil production as the member countries have split on the issue. In an emergency meeting in Doha in October, this international organization of eleven developing countries had decided to cut output by 1.2 million barrels per day (bpd), starting Nov. 1.

In support of production cut, the Saudi Arabian oil minister, Ali al-Naimi has said that OPEC should cut output because good quantity of crude oil is already available for supply. "I agree that we have to take 100 million barrels out of the market," Naimi said in a meeting of Arab oil ministers in Cairo on Saturday. However, he did not specify how that should be done.

Agreed with Saudi, Iran also urged OPEC on Sunday to again cut production because of increasing oil reserves. Iran’s OPEC governor Hossein Kazempour Ardebili said another cut in output was necessary because of a cutback in global economic growth and oversupply of oil. “Some factors like the decrease of world economic growth and accumulation of oil and stockpiles of its by-products indicate that the market needs a cut in OPEC oil output again,” Kazempour Ardebili said. He said that a cut should be 500,000 to one million barrels a day.

In a separate statement, Qatari Energy Minister Abdullah bin Hamad al-Attiyah said his country would back the production cut in Abuja if the OPEC ministers take unanimous decision on it.

On contrary, the Kuwaiti oil minister is not in support of production cut especially at a time when the price of U.S. crude oil is around $60 per barrel.

Similarly, Libya is also against more output cut. The Libyan oil ministry officials rather, claimed that the ratio of demand and supply was nearly balanced and there was no need for another cut in oil production.

Ministers of the OPEC, a cartel made up of Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela, are scheduled to meet in the Nigerian capital of Abuja on Dec. 14 to decide whether to reduce output again after oil cut in November.

OPEC President Edmund Daukoru said the coalition of eleven nations that controls over fifty percent of the world's oil and natural gas exports would probably call for further reduction.

However, the amount to be cut would depend on prices and stock circumstances, but analysts estimate a reduction of at least 500,000 bpd.

After the fresh comments on oil production cut from OPEC member countries, oil prices surged little higher on Monday. U.S. crude was 12 cents higher at $63.55 a barrel and Brent crude settled on Friday 36 cents higher at $64.62.

Since hitting a 17-month low of $54.86 on Nov. 17, oil prices have risen to above $63 a barrel on Friday. Weather forecasts that cooler state of atmosphere would stir more heating demand in the United States and anticipation of deeper supply cuts reinforced the oil prices.

A major snowstorm blanketed the US midwest on Friday, dropping the heaviest amounts in Illinois and engulfing the nation with freezing snow, ice and colder temperatures.