Saudi Arabia and the UAE released a joint communique on 29 October with non-OPEC producer Oman to confirm they were prepared to take ‘measures to reduce excess crude supply from world oil markets’. The statement follows others from major OPEC producers Venezuela and Iran that they are prepared to cut. Iraq, which falls outside the quota system because its oil exports are regulated by the sanctions regime, has called on the organisation to make an immediate cut of 1 million barrels a day (b/d). However, the organisation is already producing well above its production ceiling of 23.2 million b/d and it is unclear if it could implement a second cut.
The real challenge will be to persuade non-OPEC producers not to take advantage of the cut by increasing their own production to win greater market share. The efforts of Chavez and Naimi have not yet paid off, with Norway, Mexico and Russia all refusing to alter production to support the weak price in the short term. The countries were instrumental in OPEC’s successful revival of the oil price after the slump to less than $10 a barrel in 1998.
‘Production regulation is not on my agenda,’ said Norwegian Oil Minister Einar Steensnaes in late October. But Naimi has not given up hope of creating a coalition to defend the price. ‘We have yet to meet the others, but we are confident everyone will recognise the importance and value of co-operation to ensure a reasonable return on investment and reasonable revenue,’ he said.
Oil must be taken out of the market to redress the poor condition of oil demand. Data published by the American Petroleum Institute on 30 October showed growth in US crude oil stocks over the week ending 26 October of 884,000 barrels; distillate and gasoline stocks also rose. Prices remained relatively sedate, caught between the confirmation of poor demand and the hope of tightening supply from a new production cut. Benchmark Brent crude on 31 October was priced at $20.82 a barrel, a $0.48 rise on the previous week, while OPEC’s basket of crudes was priced at $19.30 a barrel on 29 October, marking a slight fall on the previous week.