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Page added on March 30, 2009

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OPEC cuts put floor under oil price; prevented collapse: Muhanna

Dubai (Platts) – OPEC’s decision to cut production by a combined 4.2 million b/d last year
succeeded in putting a floor under oil prices, balanced the market and
prevented an “unusual” build in consumer oil stocks, according to a senior
Saudi oil adviser.

Ibrahim al-Muhanna, an adviser to Saudi oil minister Ali Naimi, said in a
paper presented to a March 28 meeting of the Organization of the Arab
Petroleum Exporting Countries (OAPEC) that OPEC’s decision to implement cuts
had come under “harsh” attack from Western oil-consuming nations, including
the US, the UK and consumer watchdog the IEA, which saw the move as
“unreasonable.”

“But time has proved OPEC’s critics wrong and justified the group’s
realistic action,” he wrote.

Despite some dispute within OPEC on such issues as the lack of
cooperation from non-OPEC and differences of opinion on the level of OPEC’s
compliance with the cuts, which Muhanna said had harmed OPEC’s credibility
both within the organization and in the outside world, the supply cuts had had
the desired effect.

Platts



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