Ministers from the Organization of Petroleum Exporting Countries meet Wednesday in Vienna to discuss cutting production in an effort to raise and stabilize prices.
OPEC has cut production three times this year, reducing total output by 3.5 million barrels per day. When OPEC ministers meet in Vienna they are expected to agree to cut oil production again, by another 1-1.5 million barrels a day.
Iran's deputy petroleum minister in charge of international affairs, Hussein Kazempour-Ardebili, says the move is necessary because of global economic recession and a decline in demand for OPEC oil. "As a result of the slowing down of the economic growth of the world, and also the aftermath of the 11 of September, which exacerbated the trend of the recession in the global economy, the call for OPEC oil has been reduced," he said. "And at the same time, we see increase in production by certain non OPEC members. So, we had to review our output."
OPEC oil has been selling at around $19 a barrel, well below the cartel's target price of $25 a barrel. OPEC hopes that by reducing output it can prop up and stabilize prices.
Mr. Kazempour-Ardebili acknowledges OPEC is in a bind. If it does not cut production, prices will continue to fall, and he says that will discourage producers and industry-related companies from investing in exploration and production capacity. If OPEC does raise prices, it might fuel the worldwide economic recession already underway. "I think there is a danger," he said. "In fact, when there is a recession, OPEC should sustain a level of price conducive to economic growth, because it is going to have a short impact. This is a trade-off, whether you want to pay more for longer security, or pay less to accommodate the current recession in the market."
Mr. Kazempour-Ardebili says a delicate balance must be struck. He also says much depends on what non OPEC oil producers will do.
Discussions have been underway with non-OPEC producers such as Russia, Mexico, and Norway. Russia has offered a symbolic cut in output of 30,000 barrels per day. Norway and Mexico have not committed to cuts.
Mr. Kazempour-Ardebili says Iran is waiting to see what support OPEC gets from non-cartel producers. He says OPEC cannot continue to cut production, give up market share to outside producers, and lose money in the process. He warns that if other producers do not trim production, it could result in a price war.