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Calgary: The Opec president said on Monday it was too early to decide if the group would need to cut oil production again when it meets in December, despite a drop in crude prices after cuts announced last week.
Edmund Daukoru said Opec members need to keep their eyes on market fundamentals before the meeting to determine what impact the latest round of tighter quotas has had on fragile prices. "If there is too much surplus, as there is currently, of course we have to mop it up," he said at a news conference hosted by brokerage FirstEnergy Capital Corp in Calgary.
"On the contrary, if a lot of the overhang is used up, if a lot of the stocks are used up, by then, we will respond to market call. What we are trying to do is moderate the market by playing by the fundamentals of supply, demand, price," he added.
Opec, which pumps more than a third of the world's oil, announced on Friday it would cut 1.2 million barrels a day of output, but so far that has failed to stem a drop in prices.
Opec meets again in Abuja in December.
"I cannot say ahead of time whether we will cut or will not cut, just continue a process as it relates to the fundamentals, and that's exactly what we are going to do," said Daukoru, who is also Nigeria's minister of state for petroleum resources.
Analysts say a big reason for oil's drop in recent days has been market scepticism over Opec members' commitment to actually cut output under the agreement.
Daukoru took issue with that, saying markets are now being driven more by fundamentals, including increases in Opec output capacity, than speculators and fears of disruptions, as had been the case in recent years. "To me, the long-term impact that the market is beginning to respond to could well be the excess capacity that Opec has installed," Daukoru said.
For years, members claimed they had overall spare capacity of about two million barrels a day, a figure the market didn't take seriously, he said. The figure is climbing now to four million to five million barrels a day, and "somebody's bound to notice."
Canada should develop closer ties with Opec, Daukoru said on Monday ahead of a visit to the country's booming Alberta oil sands region.
"Canada could well get to a point where they would have to begin to listen to what Opec is saying ... and maybe, God knows, even a common dialogue with Opec," Daukoru told reporters in Calgary.
But Canadian officials spurned the invitation, saying they are not interested in closer ties or Opec membership.
"Canada will not even consider joining Opec. Our energy production in Canada is based on the principles of a free market. We will not stray from that at all," said Natural Resources Minister Gary Lunn.
"Any new markets we pursue will be based on free market principles," he added.
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