02-09-08 OPEC may need to cut oil supplies by as much as 1.5 mm bpd, or nearly 5 %, to balance global markets by early next year, Iran's OPEC governor said. The Organization of the Petroleum Exporting Countries should consider a two-step plan to cut supplies at its meeting in Vienna, the official from Iran said.
"The current market is not balanced, it is oversupplied," Iran's Mohammad Ali Khatibi told. "Oversupply cannot continue for a long period. It will definitely have an impact on the price and on investments in the oil industry."

The first step in balancing supply and demand would be for members that are pumping above their informal target to cut back to the agreed levels, which would bring output down around 500,000 to 700,000 bpd, he said. The second step would be for a formal output cut and could be left until the producer group, supplier of over a third of the world's oil, meets again in Algeria in December, he added.
"We can take this step later if we consider it necessary," he said. "There are so many factors that are uncertain right now, we may need to do this in December."

By then, it should be easier to measure how much the global economic slowdown has impacted demand and how much oil producers outside of OPEC would pump over winter, he added. That would give OPEC a clearer idea of what it needs to supply to match demand, he said.
As things stand, demand for oil from OPEC was expected to be around 31 mm bpd in the first quarter 2009, compared to current output of around 32.5 mm bpd, he said.

Demand would slip around 1 mm bpd to 30 mm bpd in the second quarter, but there would be no need for OPEC to trim further then, he added.
This would allow inventories to grow, he said.