OPEC: Get set for oil shock and awe

Source:PRESS TV

OPEC says global markets should prepare for a "surprise" output cut.

OPEC president Chakib Khelil says oil markets should prepare for a "surprise" output cut after the organization's Algeria meeting.

"A consensus has formed for a significant reduction of production levels" by the 14-member Organization of Petroleum Exporting Countries, Khelil told AP on Saturday.

The OPEC head's warning comes as markets have already been expecting an output reduction; however, Khelil said that it could be "severe," suggesting cuts of as much as 2 million barrels per day.

A decision that startles markets would help bolster slumping oil prices, Khelil said. "The best way is to surprise them," he said. "I hope it (the decision) will."

OPEC members are expected to announce their decision during a summit in Oran, Algeria, on December 17.

The decision comes as crude prices slipped to $40.81 a barrel on Friday, the lowest level since May 2005. This is while only in July, prices peaked at record highs above $140 a barrel.

The Saudi Arabian king earlier said that $75 a barrel would be a fair price, an idea that has received the support of other members of the organization.

Khelil urged oil producers outside OPEC to help the organization boost prices, especially Russia. Moscow had earlier said it could sign a cooperation memorandum with OPEC in Oran.

"We hope that Russia will apply (quota decisions) ... as if it were an OPEC member,'' he said, adding that the OPEC decision is not intended to "hurt the world economy."

Exporters have been pummeled with low prices, falling demand and declining revenue as a result of the dark outlook of the global economy.

Earlier in November, Khelil was quoted by the Algerian newspaper El Khabar as saying that the group's member states had lost about $700 billion due to falling oil prices.