Kuwait may cut output to support falling crude

KUWAIT: Core Opec producer Kuwait may join Nigeria and Venezuela in cutting its oil output if prices continue their steep drop, Kuwaiti oil minister Sheikh Ali al-Jarrah al-Sabah said on Wednesday. His comments were significant because Kuwait is the first of Opec’s Gulf members to take this position.

Oil rose back to near $59 a barrel on Wednesday after Kuwait said it may join other Opec countries in cutting output if prices continue their three-month slide. US crude climbed 27 cents to $58.95. London Brent rose 42 cents to $58.91, after hitting this year’s low of $57.78 earlier in the session.

Top exporter Saudi Arabia and its Gulf neighbours Kuwait and the United Arab Emirates have most of the world’s spare oil output capacity and are best placed to raise output when needed. They also shoulder the burden of cutting back when the market is oversupplied.

“Kuwait may voluntarily lower (oil output) in order to maintain the market’s stability,” Sheikh Ali said. Only one week ago, with US oil above $61, he said Kuwait would not cut a single barrel of crude. But oil’s decisive move below $60 has made him think twice.

While a 25% drop in US crude from a mid-July peak of $78.40 is proving stressful for the Organisation of the Petroleum Exporting Countries, oil at three times its ’02 level is also causing discomfort in some consuming countries. The Kuwaiti oil minister called $60 for US crude a comfortable price, but said $50 was worrying. US oil fell as low as $58.2 earlier on Wednesday, its lowest since mid-Feb.

Opec trackers said Sheikh Ali’s view might well be shared by fellow Gulf producer Saudi Arabia, a close US ally that has kept silent so far. “Oil at $60 is still high in absolute terms, so it’s a difficult political decision for some producers to cut supply — especially Saudi Arabia,” said energy consultant Geoff Pyne, adding “If we get down to the mid-$50s on US crude, I expect to see more obvious support from Opec.”

Opec, which pumps over a third of the world’s oil, has kept its ceiling at 28m barrels daily for over a year. It chose not to adjust formal limits when it met last month and US oil was about $66. But oil ministers due to meet next on December 14 are growing increasingly worried by US heating oil stocks at their highest in seven years and forecasts of dramatically lower demand for their crude.

Some analysts have questioned Opec’s ability to speak with one voice since Nigeria and Venezuela announced token output cuts to stem oil’s rapid decline.

An official at Opec’s Vienna headquarters said on Wednesday Opec members were not yet panicking over price and none were expected to join Venezuela and Nigeria in making cuts just yet. But that situation could soon change.