Opec may have to wait until December to take action to reach a preferred oil price range of $70-$90 a barrel because the effect of its latest cuts is not yet clear, the group's president said on Sunday.
Chakib Khelil told a press conference that he saw a meeting of Opec ministers in Cairo later in November as more of a brainstorming session that might formulate recommendations for action at Opec's gathering at Oran, Algeria on December 17.
"Our objective is to reach a price of $70-$90," said Khelil, who is also Algeria's Energy and Mines Minster.
"Why that price? Because it's the price of the marginal cost for new developments, whether that's Canadian bituminous sands, the Brazilian deep offshore or even Venezuelan heavy crude."
"If we don't have $70-$90 in the next few years then eventually we'll go much higher (in price) because we will have no production from these deep reserves, from the bituminous sands or from the kind of reserves that need $70."
The oil price has tumbled in recent months as the global economic crisis hit demand in big consumer nations, with US crude falling $1.20 to $57.04 on Friday.
Opec countries, expected to meet in the Egyptian capital on November 29, are considering action to halt oil's slide as they face reduced revenues and a struggle to finance domestic projects.
Khelil said it was too early to say whether cuts agreed at its meeting in October would be enough to revive prices. "We don't know if that will be enough because most of the producers have not yet completely applied their reductions, therefore we will know that in one month or maybe two months," he said.
"The only source of information that we have comes from insurance companies who are going to tell us who are applying (the cuts)," he said, apparently referring to shipping specialists who monitor tanker movements.
He added that Opec members had no choice but to implement the cut agreed at its meeting in October. "We have a rapid deterioration of price. What you gain in volume you lose rapidly in price," he said.
He said that in the longer term prices were headed higher, a development that was clearly indicated in the forward curve of the futures market that showed higher prices one year ahead and longer.
But he agreed in answer to a question that "anything could happen" in the interim, including a price slide to $20-$30 if supply and demand became further imbalanced. He warned the industry against falling into what he called the Catch 22 that it faced after the oil price slide of 1998.
"There was a fall in price, a loss of confidence in investment and when demand finally picked up in 2000-07 it took a lot of effort to follow that demand.
"If companies commit the same mistake now as they did then and let staff go, we will go back to the same situation, and in 2011-12 we will have the same result - very considerable prices."
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