Oil prices fall to lowest level in 2006
WASHINGTON (AP) -- Oil prices fell to their lowest level this year Wednesday as doubts grew that there is a consensus within OPEC for an immediate output cut.
Since July, the cost of crude oil has plunged by more than 20 amid rising global inventories, concerns about slowing economic growth and a milder-than-anticipated hurricane season.
Against this backdrop, the president of the Organization of Petroleum Exporting Countries, Nigerian oil minister Edmund Daukoru, says there is a need -- and an agreement -- to cut production by 1 million barrels a day starting next month.
But Saudi Arabia, the country whose participation is necessary to make any significant output reduction, has not publicly confirmed this.
"The market just doesn't believe" a supply cut is imminent, said Michael Guido, Societe Generale's director of commodity strategy.
Indeed, OPEC members appear to be divided over what is an appropriate price level for the cartel to try and defend by reducing its output, analysts said.
Price hawks within OPEC, such as Venezuela and Nigeria, have made it very clear over the past week -- through a barrage of public comments -- that they are quite satisfied with world oil prices hovering around 60 a barrel.
Saudi Arabia, on the other hand, has made it known -- by remaining mostly silent -- that it is not interested in attempting to prop up prices just yet.
The country's ambassador to the United States, Turki al-Faisal, said last week that Saudi Arabia seeks a "reasonable level" for oil prices that will not hurt global economic growth.
"Prince Turki's statements are the Saudi position," Nail al-Jubeir, a spokesman for the ambassador, said Wednesday. Asked whether OPEC will implement a production cut at its next meeting, al-Jubeir said: "We always believe actions speak louder than words."
Analysts said the discrepancy among OPEC members about what constitutes a fair price for oil also relates to each country's dependence on oil revenues to finance their domestic budgets.