OPEC to Reduce Production If Needed, El-Badri Says (Update1)

April 26 (Bloomberg) -- OPEC, supplier of 40 percent of the world’s oil, will reduce oil production if necessary to support prices, Secretary General Abdalla el-Badri said.

“I am sure if at the May meeting there is a need to cut, they will take that decision,” el-Badri said today in an interview in Algiers. “In OPEC member countries, 35 projects have been delayed because of falling oil prices.”

Production cuts by the Organization of Petroleum Exporting Countries since September have failed to raise oil prices to the $70 a barrel sought by members including Venezuela as the global recession erodes demand. The average price in the first quarter was $43.32 a barrel, 56 percent lower than a year earlier. The 12-nation group will meet May 28 in Vienna.

“Saudi Arabia and the Gulf states will be reluctant to accept a cut if prices stay at this level because they wouldn’t want to be perceived as hindering the recovery of the world economy,” said Ehsan Ul-Haq, head of economic research at JBC Energy in Vienna. “Most OPEC countries are satisfied with prices at around $50.”

The oil market is oversupplied because of production increases from non-OPEC countries even as OPEC members reduce output to stem a price slide, Algeria’s Oil Minister Chakib Khelil said. Oil traded in New York, which reached a record $147.27 a barrel in July, ended last week at $51.55.

Oil ‘Oversupply’

“There is an oversupply of 720,000 barrels and it should be cleared,” Khelil told reporters in Algiers today. “Non-OPEC countries did not help us to stabilize prices,” he said, adding that some countries had increased their production by 500,000 barrels a day.

Crude at $50 a barrel is not enough to meet investment needs, el-Badri said. The price needs to be at $70, he said.

Crude prices may reach $60 a barrel by the end of 2009, Khelil said.

OPEC agreed last year to cut output by 4.2 million barrels a day, setting a production target of 24.845 million barrels a day for its 11 members with quotas. Iraq can produce at will.

The 11 countries with quotas pumped 25.567 million barrels a day in March, OPEC said in its monthly report on April 15. Ul- Haq said Iran and Venezuela are producing above their assigned targets.

Compliance is “excellent” at 83 percent, el-Badri said. It needs as much as 90 percent compliance and oil prices may fall further if OPEC members don’t comply, he said. Crude reached $32.70 a barrel on Jan. 20.

Calling for Cuts

Saudi Arabia, OPEC’s biggest producer, is “under pressure” from members including Libya, Iran, Venezuela and Algeria, to cut output at the May meeting, former Saudi Arabian Oil Minister Sheikh Ahmad Zaki Yamani said.

“The countries that are calling for a further cut are the ones whose production cuts won’t be even noticed, and nobody knows if they are cutting or not,” he said in an interview in Cairo today. “They actually want Saudi Arabia to do almost all of the cutting. In a way, they want to raise prices to the last barrel of Saudi oil.”

OPEC and 13 Asian countries urged greater oversight of oil and other commodity markets to prevent a surge in prices after the global economy recovers from the worst recession since World War II.

Participants in a ministerial energy roundtable in Tokyo sought limits on positions in over-the-counter trades and said “excessive” oil-price movements are “undesirable,” according to a statement released after today’s meeting. They also called for “continuous” investments to boost energy supplies.

The International Energy Agency, adviser to 28 industrialized nations, reduced its 2009 global oil demand forecast on April 10 for an eighth month to the lowest level since 2004. The IEA expects consumption to fall by 2.4 million barrels a day, or 2.8 percent, to 83.4 million barrels a day this year.