OPEC concerned by oil drop, but no calls to cut output: delegates

London (Platts)--16Feb2006

OPEC officials on Thursday said they were concerned by a 14% slide in
crude prices this month, though stopped short of calling for members to rein
in production from near-maximum rates to stem the decline.

     US light crude futures fell below $58/bbl on Wednesday for the first time
this year after the government reported a larger-than-expected rise in crude
and gasoline stocks. OPEC meets Mar 8 to review output, having agreed to leave
supply steady Jan 31, when crude settled at almost $68/bbl.

     "The drop in prices will be a concern, but I don't think it's time now
for OPEC to take action to decrease the production," an official from one of
OPEC's members in the Persian Gulf said. "Prices are still high. If a decision
is taken to reduce production, I think that prices will go up again."

     The jump in US stocks has diverted traders' attention from attacks on
Nigeria's oil industry and Iran's dispute with the West over its nuclear work
that boosted prices last month. Predictions of slower-than-expected growth in
demand this year have added to pressure on prices.

     A senior OPEC delegate acknowledged the "unbelievable" swing in prices
but said it was still too early for OPEC to have a clear view on what action
to take when ministers gather next month in Vienna.

     "It's very difficult to say right now" what OPEC should do, the delegate
said. "In the past twelve months, the swing has been very big. The swing in
prices is unbelievable. It means the market is looking for direction, the
market doesn't know where to go," he said.
     
     STUDY THE TREND

     OPEC oil ministers will use the three-week run-up to their meeting to
study the market to "see what the trend is" and where stocks are building, the
senior delegate said.

     In a monthly report released Wednesday, OPEC joined the International
Energy Agency in trimming its estimate for growth in demand in 2006. OPEC also
said it expected fuel stocks to recover in Asia as a cold snap ended. 
     An official from Indonesia, OPEC's only member in Southeast Asia, said
his country wanted to see still lower prices. Indonesia, whose crude output is
in decline, benefits from lower prices because it imports oil.

     "Indonesia hopes that the price of WTI will be about $50/bbl," said
Maizar Rahman, the OPEC governor for Indonesia, by phone from Jakarta. "At
present, stocks are influencing the price more than geopolitics."
     OPEC does not have a formal goal for prices after ditching a target range
of $22 to $28/bbl for its index of crudes last year. The group does not want
prices to fall below about $50/bbl for the OPEC basket, analysts have said.
     The oil minister of Saudi Arabia, OPEC's largest producer, said Feb 7
that prices needed to be "high enough to provide sufficient return to
producers, but not so high that they harm economic growth."

     Ali Naimi did not specify what such a price would be, but said the cost
of finding and producing oil was likely to be about $45-$50/bbl for an
investor.
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