LONDON • The Organization of Petroleum Exporting Countries may decide to cut the cartel’s oil output quota as the price of crude risks falling under $100 a barrel, energy consultancy CGES said yesterday.
“The worsening economic outlook suggests that oil prices have further to fall, but OPEC, whose members are due to meet in early September, may act to prevent them from falling too far,” the Centre for Global Energy Studies said in its latest monthly report.
“There is a danger, though, that the organisation will over-react, cut its production too sharply and send oil prices back up,” added the London-based consultancy.
Oil futures had fallen sharply last week on the prospect of reduced demand for energy around the globe owing to slower economic growth.
“The CGES believes that OPEC member-countries, facing increased government spending and rising inflation, will not be happy to see prices fall far below $100 per barrel,” added the report.
Oil prices have sunk since hitting record highs above $147 one month ago. However, crude futures are more than 10 percent higher than at the start of the year when they surged past $100 for the first time in history.
Meanwhile, oil fell below $113 a barrel yesterday as fears eased that Tropical Storm Fay would damage major oil and gas infrastructure in the Gulf of Mexico.
US crude fell 90 cents to settle at $112.87 a barrel while London Brent crude dropped by 61 cents to $111.94 a barrel.
World crude prices are more than 23 percent below the all-time peaks hit in mid-July, pulled lower by concerns that oil’s six-year rally has undercut world energy demand growth significantly.
But oil prices remain up about 13 percent so far this year and more than five times higher than they were in 2002.
The mild losses came as Tropical Storm Fay, the sixth named storm of the Atlantic hurricane season, appeared on a track that would narrowly avoid oil and gas production platforms in the Gulf of Mexico.
The storm was expected to hit Florida and move inland Tuesday, according to the National Hurricane Centre.
“Although some offshore personnel evacuations were reported, the system appears likely to steer well east of significant production facilities or refineries,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Shell said yesterday it had evacuated 425 nonessential workers from the gulf but added that it did not expect any impact from the storm on offshore assets and production.
Oil’s losses were tempered by concerns over military tensions between Russia and Georgia that were hindering energy shipments through the region.
BP Plc said exports of Azeri oil by rail to Georgia had stopped because of damage to a railway line in Georgia.
Also tempering oil’s weakness was a decline in the value of the US dollar, a factor that has boosted commodities markets in recent years by increasing the purchasing power of buyers using other currencies.
