OPEC advised to cut output in 2004 to keep prices stable: Report

OPEC member-countries, excluding Iraq, will have to cut production by at least 1 million barrels per day next year to prevent a collapse in global oil prices, experts warned, as reported by AFX News on Wednesday.

Herman Franssen, president of the Washington-based International Energy Associates, said on the sidelines of the Oil & Money Conference in London that the reduction will help keep prices stable at mid US$20s per barrel.

However, assuming that Iraq resumes exports at a steady 2 million barrels per day, then "OPEC, minus Iraq, will have to bring down (production) by at least 2 million barrels next year," he said.

"If they do that, then they can keep prices at mid-20s," said Franssen, who was formerly chief economist of the International Energy Agency.

If OPEC countries kept output at current levels, a price war could emerge "as they did in the late 90s" that led to the sharp fall in oil prices.

Nordine Ait-Laoussine, president of Nalcosa, a Switzerland-based energy consulting firm, saw the current trend in the oil market showing "disturbing" parallels to the events three years ago, marked by high prices and increasing inventories.

That would suggest that "barring any further unexpected developments in this fragile world, OPEC will have to enact, preferably sooner, a substantial production cut" to keep prices within its target range of about US$26-28 per barrel.

A further cut of 1 million barrels will be needed even as demand growth returns to normal levels in the coming years, he said.

Maintaining a sustainable price level will require some production sacrifice, said Ait-Laoussine, who is former energy minister of Algeria and advisor to OPEC. (*)