Falling dollar adds to Opec's woes ahead of crucial meet

ABU DHABI/VIENNA: Opec is worried by a fall in the dollar that is eroding member states’ purchasing power and ministers will take up the issue when they meet next week to discuss new output curbs. On Monday the dollar hit a 20-month low against the euro, punishing producers who sell their oil in dollars, when they buy goods and services from Europe.

Most Opec ministers are leaning towards cutting production beyond the 1.2 million barrels per day (bpd) they agreed in October to reduce high inventories. A weak dollar provides another argument for trimming supply and supporting prices.

“The dollar is not helping (matters). It affects revenue. If there is a significant drop, it is of concern to us,” UAE oil minister Mohammed al-Hamli said, adding “But as producing countries we look at market fundamentals.”

The Organisation of the Petroleum Exporting Countries will meet on December 14 in Nigeria. Many in the group still view the market as imbalanced and support a further cut of 500,000 bpd to one million bpd.

Influential Saudi oil minister Ali al-Naimi says an excess 100 million barrels must be removed. Kuwait and Libya are alone in saying existing curbs are sufficient, especially with US crude near $63 a barrel.

Oil has rallied $6 since Opec agreed its reduction, the first in two years, at an emergency meeting in October. It was oil’s rapid decline from a record $78.40 in mid-July that forced ministers then to wield the knife.

But the exporters’ club is mindful that a further round of cuts may be needed to counter an anticipated surge in supply from rival non-Opec producers and slowing economic growth in top consumer the US.

“Opec is in the process of taking up the challenge of a market that is clearly and steadily getting out of balance, after almost three years of a very strong bull run,” said Opec’s acting secretary-general Mohammed Barkindo in Vienna.

In the past, Opec has said it needed higher oil prices to offset the impact of a falling dollar, but that was in late 2003 and early 2004 when US crude was trading in the $30s.