OPEC's president said on Monday a likely cut in oil supply by the exporting cartel was no threat to global economic growth, but aimed at avoiding a price collapse in the second quarter of the year. Chakib Khelil, who is also Algerian Energy and Mining Minister, told Reuters Television that current OPEC exports were 1.5 million barrels per day (bpd) above forecast world demand this year, but that some members wanted to reduce by as much as two million to safeguard revenues.
"We don't see oil having a tremendous impact on inflation. There may be more risk in Asia... but in Europe, the United States and Japan I do not see much impact on inflation and growth," Khelil said.
The United States and Europe, where growth is expected to slow this year, have lobbied the Arab-dominated group to refrain from reducing supply as prices rose to what the U.S. government called an "unacceptable" level of $30 per barrel on Monday. "The market has integrated the expected production cut into the price... so we will not see major price changes after the decision," Khelil said.
Ministers are expected to announce the cut after a meeting in the Austrian capital on Wednesday.
Khelil said the move was aimed at stabilizing OPEC's export price around $25 per barrel, in the middle of the cartel's official $22-$28 target range. OPEC's export price stood at $24.43 per barrel on Friday.
That price was equivalent in purchasing power to $5 in 1973, he added.
The U.S. oil price is now about $6 per barrel higher than OPEC's price -- an unusually large difference which Khelil blamed on a tripling in transport costs.
"Tougher environmental regulations has led to a concentration in the tankering business
," he said.
Without a supply cut, Khelil said prices would repeat the collapse of 1998 -- when they fell to their lowest level in a decade below $10 per barrel -- because inventories were rising at the same rate as they did in that year.
The United States' assessment of the market, which concluded that a further build in inventories was required to stave off shortages, was wrong because it failed to take into account a rise in stocks at the level of the final consumer, Khelil said.
However, OPEC stood ready to fill any shortage in the market, and would probably consider an increase in production in the third or fourth quarter of the year, when demand rises seasonally, the minister said. - (Reuters)