|OPEC Is Likely to Cut Output 1 Million Barrels, PFC Energy Says|
By Grant Smith
Oct. 15 (Bloomberg) -- OPEC will probably announce a production cut of 1 million barrels a day at its November meeting, said PFC Energy, an industry consultant that correctly called the decision at the group's last summit.
The Organization of Petroleum Exporting Countries, due to meet Nov. 18 in Vienna, is concerned the 47 percent drop in crude prices from July's record indicates that supplies may overtake demand, according to Washington-based PFC. A million barrels is about 3 percent of the group's current output.
OPEC, whose 13 members produce more than 40 percent of the world's crude, announced the November meeting last week as oil plunged on concern the financial crisis will push the world into recession, cutting energy demand. The group's president Chakib Khelil said a production cut is ``very likely.'' Saudi Arabia, the world's largest exporter, hasn't said whether it would support a reduction.
``There's a growing consensus among the group that they should take a million barrels off the market,'' PFC analyst David Kirsch said in a telephone interview from Paris today. ``Saudi Arabia may not have been behind the initial public call for the meeting, but they recognize production has to be trimmed.''
The day before OPEC's last gathering in Vienna on Sept. 9, PFC Energy correctly predicted the organization would announce supply restrictions of about 500,000 barrels a day. Twenty-nine of 32 analysts surveyed by Bloomberg prior to that meeting had predicted production would be unchanged.
PFC also accurately called the group's decision to raise production at its Sept. 11, 2007, conference when all 23 analysts polled by Bloomberg had anticipated no change.
``They're trying to strike a balance between the risk of over-tightening the market and creating a glut,'' Kirsch added. ``In a perfect world OPEC would like $90 a barrel.''
The plunge in oil prices will cut record revenue for OPEC members. Members are likely to earn $1.08 trillion from exports next year, according to U.S. Department of Energy figures released on Oct. 9. That's less than the $1.22 trillion forecast the previous month.
The 11 members with output targets pledged to keep production at 28.8 million barrels a day at its last meeting, about 520,000 barrels below actual July production. That excludes Iraq, which has no quota, and Indonesia, scheduled to leave the group at the end of the year.