VIENNA (AFP) — Oil prices fell close to 101 dollars a barrel Tuesday, their lowest reading in five months, ahead of an OPEC meeting where the cartel was expected to leave its output target unchanged.
Saudi Arabia voiced satisfaction with the recent steep decline in oil prices and appeared in no mood to change OPEC's policy despite warnings by some members of oversupply in the months ahead.
"We have worked very hard since June's meeting to bring prices to where they are now. I think everything is in balance," said Saudi Arabia's Oil Minister Ali al-Nuaimi ahead of the OPEC meeting later in the day.
The Saudi kingdom, the world's biggest crude producer and de facto leader of the Organisation of Petroleum Exporting Countries, has come under fierce pressure from the United States and other allies over recent record prices.
The country agreed in May and June to pump an extra 500,000 barrels per day (bpd) to help bring down then runaway oil prices, which peaked above 147 dollars in July but now threaten to plunge into double digits.
Oil prices slumped close to 101 dollars on Tuesday, their lowest level since the start of April, as the market awaited OPEC's final decision.
Brent North Sea crude for delivery in October dropped as low as 101.27 dollars in London trading. It later stood at 101.72 dollars.
New York's main contract, light sweet crude for October, was at 104.09 dollars after briefly falling close to 104 dollars.
But some analysts believe OPEC members could opt for a "quiet" production cut as demand for oil falls, which would be achieved by reducing excess output above their official quota without formally announcing a policy switch.
OPEC policy is to limit output at 29.67 million bpd, but the group is thought to be producing about a million bdp more than this, with Saudi Arabia accounting for most of the excess.
"PFC Energy has learned that OPEC has in principle agreed to trim production from current levels above official output targets," said the Washington-based consultancy, citing an informal cut of 500,000 barrels per day.
"The communique text will likely focus on the need to abide by agreed-upon production targets rather than on numerical targets for cuts," it added.
Analysts at investment bank Natixis commented: "There is room for reducing oil OPEC production by around 1.0 million barrels per day if Saudi Arabia and other Gulf members respect their own quota."
Iran has led calls for OPEC members to meet their quota targets. Venezuela, Libya and Algeria have all raised worries about oversupplying the market as global economic growth weakens.
"We believe there is a level of overproduction of between one million and one million and a half (barrels per day)," said Venezuelan Energy Minister Rafael Ramirez as he arrived Tuesday.
The stakes for OPEC are entirely different from the last time the group met formally in March when prices had broken through 100 dollars and were on a steep upwards trajectory.
This time, oil prices are on the way down approaching 100 dollars -- a level many members, above all the traditional price hawks of Iran and Venezuela, are keen to protect.
Furthermore, producers face an uncertain outlook for oil demand, with economic growth slowing and consumers across the world taking measures to reduce energy consumption as prices for heating and transport rise.
The dilemma for producers is how to find a balance between their desire for revenues and the danger that high prices could choke off economic growth.
Gulf producers United Arab Emirates and Kuwait have said there is no need to change production.
"The market is adequately supplied," stressed Emirati Oil Minister Mohammed al-Hamili on Tuesday.
With prices falling, this OPEC meeting has cast a spotlight on the minimum price that group members would like to see.
Iran and Venezuela have identified 100 dollars as their floor, Ecuador has referred to 110-120 dollars as "reasonable", while analysts see Saudi Arabia and other Gulf states as being comfortable with a figure below 100 dollars.
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