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CAIRO: The Organization of Petroleum Exporting Countries (OPEC) oil
exporting cartel, suffering from plummeting oil prices, faces
further pain next year as a worldwide recession dampens demand for
crude even more, analysts believe.
“OPEC is dealing with tough circumstances, the
toughest in 10 if not 30 years,” Raad AlKadiri of PFC Energy told
Agence France-Presse on the sidelines of OPEC’s informal gathering
in the Egyptian capital.
Although OPEC ministers decided on Saturday to
keep output unchanged, they also vowed to cut production next month
in the face of flagging demand and despite the global financial
crisis.
“We took note of the serious deterioration in
the world economy and its serious consequence on the oil price,”
OPEC President Chakib Khelil said, adding that “negative growth in
[oil] demand is possible” next year.
“We realize that in the first quarter of next
year we are probably going to have a decline in demand, and in the
second quarter we are going to have a big decline,” Khelil said.
The Organization of Petroleum Exporting
Countries, which pumps 40 percent of the world’s oil, has already
slashed its output twice this year by a total of two million barrels
a day in response to falling prices.
But the production cuts, agreed in September and
October, failed to stop prices sliding under $50 a barrel earlier
this month as concern mounted about a global recession that has
already infected the Euro zone and Japan.
Analysts said that OPEC’s hands were tied
because cutting output could damage the world economy even more.
“With much of the world in or heading towards
a recession, OPEC does not have a huge amount of political leverage
in being able to dramatically reduce production,” said
BetOnMarkets analyst Dave Evans in London.
“They have to support crude prices while at
the same time ensuring that they do not do long-term damage to the
global economy. They cannot afford to bite the hand that feeds.”
Earlier this month, Brent North Sea oil plunged
to $47.40 and New York crude touched $48.35, marking the lowest
points for nearly four years, as recession concerns intensified.
That compared with their respective record highs
of $147.50 and $147.27 on July 11, when supply concerns had sent
them rocketing.
“The economic data is changing and getting
worse every other week,” added analyst Bill Farren-Price at Medley
Global Advisers.
“The US new demand data for September which
shows 13-percent demand contraction in [oil] products consumption.
And that’s very serious.”
OPEC also predicted on Saturday that the market
would not recover before the second half of 2009 amid the looming
global recession.
Evans warned that the impact on energy
demand—and oil prices—would depend on the severity of the sharp
economic slowdown.
“Recessions are often officially announced
many months after one actually starts, but whether one is
‘officially’ declared or not, the US, UK, Japan and most of
Europe are in recession. Even the Chinese behemoth is slowing,” he
said.
“Subsequent energy demand depends on how
protracted the decline turns out to be. If it looks like the global
slump will get worse than currently expected, then energy demand
will fall further.”
-- AFP
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