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OPEC troubled by falling oil prices

AFP/The Local · 26 Nov 2014, 09:36

Published: 26 Nov 2014 09:36 GMT+01:00

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Rosneft said Tuesday it had cut its daily output by 25,000 barrels because of "market conditions". The token reduction represented less than one percent of the behemoth's total and did nothing to boost energy prices on depressed global commodity markets.

The announcement, given in a company statement, came after Rosneft chief executive Igor Sechin held talks with officials from Mexico and OPEC members Saudi Arabia and Venezuela in Vienna, the venue for Thursday's key meeting of the Organisation of Petroleum Exporting Countries.

The meeting is the most significant in recent years for OPEC, whose dozen members together pump out about one-third of the world's crude.

The Vienna-headquartered cartel is under pressure from its poorer members like Venezuela and Ecuador to cut output after tumbling prices have slashed their precious revenues.

Crude futures have sunk by over 30 percent since June to four-year lows on the back of plentiful oil supplies, a strong dollar and worries about stalling energy demand in a weak global economy.

'Price not good'

Oil prices tumbled again Tuesday, with the US benchmark down 2.2 percent, on expectations that the OPEC cartel will not agree to cut output.

The key US futures contract, West Texas Intermediate for January delivery, dived $1.69 on the New York Mercantile Exchange, closing at $74.09 a barrel, its lowest level since mid-September 2010.

Meanwhile Benchmark Brent North Sea crude for delivery in January fell to $78.33 a barrel in London, down $1.35 from Monday's close.

Both fell even further Wednesday, with West Texas Intermediate dropping 40 cents to $73.69 and Brent easing 31 cents to $78.02.

However the cartel's Gulf members, led by kingpin Saudi Arabia, have rejected calls for a cut unless they are guaranteed market share in the highly competitive arena, according to analysts.

Despite the apparent differences, OPEC and non-OPEC oil producers Tuesday agreed that crude prices have fallen too far, Venezuelan Foreign Minister Rafael Ramirez said.

"We agreed that the price is not good. Everybody is worried," he told reporters.

Russian Energy Minister Alexander Novak also attended the meeting in Vienna on Tuesday, at which the four delegations failed to agree on a joint cut in output and left any such decision for the full meeting of OPEC members.

The Rosneft statement said Sechin "believes that market players should be responding to market changes more proactively".

He did not say when the country's largest oil producer -- responsible for about 40 percent of Russia's total output-- had implemented the curbs.

But they represent just a fraction of the 4.1 million barrels per day that Rosneft says it has averaged over the first 10 months of the year.

Saudi silence

Ahead of the OPEC meeting, the world's top oil producer Saudi Arabia has cut what it charges US customers, in a move seen as a bid to maintain its market share amid increasing competition from oil extracted from shale rock in the United States.

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Analysts say the kingdom is content to see shale oil producers -- and even some members of the cartel -- suffer from low prices and will resist pressure to reduce output and shore up the cost of oil.

Saudi Oil Minister Ali al-Naimi was silent about his government's intentions Monday as he arrived in Vienna.

His Iraqi counterpart Adel Abdel Mahdi arrived in the Austrian capital pushing for action, deeming the steep price drop "not acceptable".

OPEC pumped 30.6 million barrels per day last month, above its 30 million bpd oil target, according to the International Energy Agency which advises countries on energy policy.

"With many of the cartel's members suffering a rapidly deteriorating balance sheet given the recent rout in Brent prices, all eyes will be firmly fixed on this OPEC meeting for any indication of members taking steps to address the fundamental picture" of supply and demand, Sucden broker analyst Kash Kamal said Tuesday.

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AFP/The Local (rosie.waites@thelocal.com)

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