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OPEC won't cut output ceiling in Nov. 27 meeting -- two experts forecast

Oil expert and former director of research at the Organization of Petroleum Exporting Countries (OPEC), Dr. Hassan Qabazard
Oil expert and former director of research at the Organization of Petroleum Exporting Countries (OPEC), Dr. Hassan Qabazard

By Osama Jalal

KUWAIT, Nov 22 (KUNA) -- The Organization of Petroleum Exporting Countries (OPEC) will not likely lower oil production ceiling in its upcoming Nov. 27 meeting, two Kuwait oil experts concurred citing division among the oil cartel's members.
They also expected that the price drop will continue in the coming period, but they agreed on the strength of the Kuwaiti economy and its ability to withstand the drop in prices for about three years to come.
"OPEC has two options. The first one is to maintain the current production ceiling, estimated at 30 million barrels per day while obliging member states to adhere to its output quotas which would help cut production by about 600,000 barrels per day," CEO of the Kuwait Catalyst Company and former Director of OPEC Research Division Hasan Qabazard told KUNA.
"The second option is to cut output ceiling by a million or two million barrels per day." Qabazard, however, ruled out the second option as supply in the market from non-OPEC states is huge and growing.
"This cut would, in fact, mean that OPEC states would lose parts of their global market shares as non-OPEC members would rush to the fill the gap," he told KUNA.
"Thus, the oil price will not increase as the supply will meet the demand." Qabazard expected these concerns would push OPEC to wait for correction movement from the market itself.
"The current prices deterioration may last for a year and a half or two years at best." He said that the Kuwaiti economy will inevitably be affected by lower prices.
"Kuwait's situation is better than other countries as Kuwait has had huge budget surpluses over the past years, Future Generations Fund and huge investments across the world," he noted.
"This will help Kuwait withstand the low oil prices for a period ranging from two to three years ".
OPEC daily basket price went down to USD 74.05 a barrel on Wednesday, compared with USD 74.36 pb a day earlier, the cartel said here on Thursday.
The annual rate of the OPEC basket price hit USD 105.85 pb, the OPEC said.
The cartel's 12 member states decided, last June, to maintain the output ceiling at USD 30 million barrels per day for maintaining the market stability.
For his part, Head of Al-Sharq for Petroleum Consulting Company Abdul-Samea Behbehani said that global oil markets are affected by the political atmosphere so that the influence of technical factors does not continue throughout all this period of four months.
Behbehani predicted OPEC would take decisive resolutions stop the fall of oil prices in the upcoming meeting. "The cartel is divided into two sides; one against output cut and this side is spearheaded by the Kingdom of Saudi Arabia and is backed by the Gulf Cooperation Council (GCC), and other side supports the production cut and is headed by Iran and backed by Venezuela, Ecuador, Iraq," Behbehani told KUNA.
"The current situation is a political oil war reminiscent of the one that took place before the establishment of OPEC." Behbehani said that hope still exists that prices could rise again "who knows the situation could change after the OPEC meeting, but the results will not be quick." He noted that Kuwait is able to deal with the current crisis but, stressed that Kuwait has to reconsider the feasibility of the planned mega projects.
"There is a need to use part of past years' surpluses set up for projects in the country and acquire huge and lucrative projects abroad to help make up some of the oil fall losses," he concluded. (end) osj.tb.ibi