OPEC may need to cut supply in 2010, not now: PFC

LUANDA: OPEC could have to cut oil supply by 1 million barrels per day (bpd) early in 2010 if weak demand results in a further rise in already swollen global inventories, consultancy PFC Energy said in a report.

The Organization of the Petroleum Exporting Countries meeting in Angola on Tuesday was expected to keep supply steady because of concern any cut could push prices higher and threaten global economic recovery. But high inventories could force OPEC’s hand early next year, before the second quarter when seasonal demand is typically at its lowest, PFC said. “OPEC could face the prospects of needing to undertake Herculean efforts to tighten up fundamentals in early 2010,” PFC Energy said in the report.

“Most likely the organization would need to agree to substantial cuts — of 1 million bpd or more from actual production — in early 2010 in order to bring total inventories down to manageable levels.” The oil price is close to the $75 per barrel top exporter Saudi Arabia and others have said is fair to both consumers and producers. Saudi Oil Minister Ali al-Naimi described the price as “perfect” earlier this month and has said there was no need for the group to change supply levels.

In September, Naimi said there would be no reason for OPEC to revise output in 2010, based on supply and demand projections then available. But if the outlook for recovery in energy demand next year deteriorates, the price might also fall and inventories rise further, leaving OPEC facing a tough decision. After global recession triggered a sharp decline in oil use last year, the group agreed to slash 4.2 million barrels per day — a record reduction equivalent to around 5 percent of global daily consumption.

Economic Times