Analysts: 1 million barrel OPEC cut not enough

A production cut of even 1 million barrels per day at OPEC’s upcoming emergency meeting is unlikely to reverse slumping crude oil prices in the short term, said analysts Sunday, amid mounting calls by several cartel members to take decisive action to keep prices at the US$80 per barrel level.

The Organization of Petroleum Exporting Countries’ decision to hold an emergency meeting next Friday clearly signaled the group’s concern that crude’s recent pummeling would siphon revenue necessary to sustain government spending and weather broader fallout from the current global financial crisis.
The meeting had initially been moved up to mid-November, about a month earlier than scheduled, but was pushed to Friday as the oil price dropped below US$70 per barrel.

Analysts said some key producers may be eying the meeting as the first step in reasserting control over the market — particularly as the cartel has argued that record rallies earlier this year were driven more by speculation than supply and demand.

“What they really want to do is position themselves now in a situation where they can manage markets … a lot more comfortably next year, and potentially for the recovery in 2010,” said Raja Kiwan, a Dubai-based analyst with the Washington-based oil consultancy, PFC Energy.

Internattional Herald Tribune