Algiers (Platts)--17Oct2008

OPEC president Chakib Khelil said late Thursday that it was obvious that
the cartel needed to cut supply as demand has weakened and oil prices have
plummeted, warning that unless action was taken oil prices would fall further.

Khelil, speaking to reporters in the Hassi Messaoud region, would not say
how much of a cut he thought OPEC ministers would agree to when they meet on
October 24 for an emergency conference, brought forward from November 18 after
prices slid to their lowest level in 13 months.

"I think we will have several meetings at close intervals," said Khelil
when asked how the producers' club would cope with the financial crisis that
has slowed down economic growth in the main energy consuming regions.

"It is obvious that in order to guarantee balance in the market, we have
to reduce supply," Khelil said, noting that the price of a barrel now
reflected market fundamentals because speculators were out of the market.

"We are left with the real economy of supply and demand," he said.
"Supply has remained the same while demand has fallen, which has led to a rise
in stock levels."

"Because of the recession, demand in the US and Europe has declined and
we see demand growth only in China and the Middle East ... so we have to see
if China and the Middle East will make up for this [falling demand]," said
Khelil, who is also the Algerian oil minister.

"The problem is that if we leave things as they are, oil prices will fall
further," said Khelil, noting that prices have fallen in less than two months
from $100 to $90 and then $75/b, prompting OPEC to call an extraordinary
meeting ahead of a December 17 conference to be held in Oran, Algeria.

The NYMEX front-month crude futures contract on the CME's Globex system
jumped $3/barrel to $72.85/b at the start of trading in Asia Friday, having
closed below $70/b at the end of the US trading day.

Khelil said that while OPEC did not have a price target and left markets
to determine prices, marginal costs meant that ultra deep water blocks and oil
sands could not be developed economically below $70/b.

"People say that the marginal price below which we cannot go is between
$70 and $90/barrel."