Algiers (Platts)--11May2009

Algerian oil minister Chakib Khelil said late Saturday that it would be
difficult for OPEC to cut production at current price levels and while two or
three of its members had not complied fully with previous supply cuts.

"OPEC could decide to cut production on May 28 [its next scheduled
meeting in Vienna]," Khelil told state television, but he added this would be
"difficult given that at least two or three members have not respected
previous cuts because they fear a reduction in their revenues."

Algeria, however, had achieved earnings of between $13 and $14 billion
from hydrocarbon sales at the end of the first quarter, allowing it to put in
place a strategic investment program which is achievable if prices stay at
current levels, he said.

"If oil prices stay at current levels, our revenues will be in the region
of $45 to $50 billion, which is the average of $48 billion registered between
2000 and 2008," Khelil told state television. But, he said, there was no
guarantee oil prices would remain stable.

"There is a kind of economic recovery, which is why oil prices have
stabilized around $50/barrel. But no one knows when the crisis will end," he
said, adding that he expected oil prices to reach $60/b by year-end.

US light sweet crude oil futures closed at $58.64/b on Friday after a
week-long rally on the back of a weaker US dollar and a stronger equities
market but fell back in Asian trade Monday to around $57.55/b. They remain
nearly $90/b below last July's record high of $147.27/b for US light sweet
crude oil futures.

OIL PRICE ACCEPTABLE

An OPEC delegate said current oil prices were "acceptable" but the cartel
was unlikely to agree a supply cut at its May meeting. despite weak demand for
energy and high stocks.

"Demand is weak and stocks are still high but I doubt they will take
action on supply at the next meeting," the delegate said, adding that OPEC
would review the market again in September when the supply and demand picture
should be clearer.

OPEC agreed three cuts totaling 4.2 million b/d last year as the economic
slowdown began to erode energy demand in the main oil consuming states. At its
last meeting in Vienna March 15, the group agreed to maintain the current
production ceiling of 24.845 million b/d for the 11 members bound by output
restraint but tighten compliance with the existing cuts until May.

There has been no word yet from OPEC kingpin Saudi Arabia, the world's
biggest oil exporter and the most influential member within the 12-member
producer's club.

However, Saudi Arabian oil minister Ali Naimi said in Tokyo recently that
while markets and not producers determined the price of oil, "it would be
nicer if they were higher."

Saudi Arabia's King Abdullah and Naimi have both said previously that
they consider $75/b to be a fair price for oil.

French economy minister Christine Lagarde said Sunday in Riyadh before
talks with the Saudi monarch and Naimi that it would be good if oil prices
could be stabilized at a level between $70 and $80/b.

"We want less volatility, more predictability," Lagarde said, as quoted
by French news agency AFP.

She also said she would discuss with Saudi officials the current state of
the global economy, oil supply and its impact on the financial crisis.

MIDEAST ECONOMIES TO CONTRACT IN 2009

The economies of the Middle East's main oil-producing states, including
Saudi Arabia, are expected to contract in 2009, largely as a result of
declining oil revenues and OPEC production cuts, the International Monetary
Fund said Sunday in a regional outlook.

The IMF said it now expected GDP growth in the Middle East to fall to
2.3% in 2009 from 5.4% in 2008.

In its May 2009 Regional Economic Outlook Middle East and Central Asia,
the IMF forecast oil GDP growth for Middle Eastern oil exporters, which groups
oil giant Saudi Arabia along with Algeria, Bahrain, Iran, Iraq, Kuwait, Libya,
Oman, Qatar, Sudan, the UAE and Yemen, to fall from 2.4% to minus 3.5%.
Non-oil GDP is expected to fall from 6.1% to 3.7% for the same period.

"The drivers of slowdown are coming from oil GDP," IMF Middle East and
Central Asia Department director Masood Ahmed said in presenting the report in
Dubai.

Ahmed attributed the decline not only to falling oil prices, but also to
production cuts, particularly form OPEC oil-producing states.

But despite the fall in oil revenues, regional exporting countries were
expected to "continue to do reasonably well" in the current economic climate
"because most of them are using their reserves that they have accumulated
during the boom years to continue to maintain the levels of public spending,"
he said.

By maintaining public spending levels at a time when oil revenues have
"dropped enormously" oil exporting nations have seen their external and fiscal
balances deteriorate because imports have remained the same while exports have
fallen, he said.

"As a result if you look at the current account it has gone from a
surplus of $400 billion last year to a small deficit this year, if oil prices
stay at these levels," Ahmed said.

The risk for these countries now, the IMF official said, is that a
prolonged global recession would have a continued effect on oil prices that
would put pressure on public spending.

He noted that oil prices had risen recently--US oil futures closed at
close to a six-month high above $58/b on Friday--but that if the recession
continued, oil prices would be affected negatively and this would have an
impact on the region's economies.

A senior Kuwaiti oil official was quoted Sunday as saying that he did not
expect OPEC to cut production in May because of "political considerations."

Mousa al-Marifie, a member of Kuwait's Supreme Petroleum Council, which
sets energy policy, said in remarks carried by the daily newspaper Annahar
that OPEC members appeared to have lowered their oil price expectations from
$70/b to $50/b.

He said he expected oil prices to average around the $50/b level but
could rise to $60/b by the end of the year if OPEC were to cut production.
--Lies Sahar, newsdesk@platts.com
--Kate Dourian, kate_dourian@platts.com