Oil producers seek oil price stability

The world's biggest oil producers and consumers called on Friday for cooperation to prevent extreme volatility in oil prices and help guarantee future energy supplies.

Opening a meeting of energy ministers from OPEC and the big consuming nations as well as energy companies, British Prime Minister Gordon Brown called for action to reduce huge swings in oil prices that he said had damaged the world economy.

"We will need a new partnership between oil-producing and oil-consuming countries," Brown said. "As with the global financial crisis, this global crisis in our energy markets cannot be solved by one nation or one continent alone."

Brown originally called the meeting in June when oil prices were heading towards an all-time peak of more than $147 a barrel. Prices have dropped more than $100 since then due to the credit crisis and a recession that has shrunk demand for fuel.

Nobuo Tanaka, executive director of the International Energy Agency, said the need for dialogue between oil producers and consumers remained even after oil prices had fallen sharply.

"The price decline ... has provided some welcome respite, a breathing space in these troubled economic times," said Tanaka. "But the need for dialogue remains just as strong."

Saudi Arabian Oil Minister Ali al-Naimi agreed that oil price volatility damaged all countries.

"Instability and volatility in oil markets hurt everyone," he said, stressing that the recent sharp falls in oil prices to very low levels caused "havoc" with investment plans in oil producing countries and jeopardises future oil supplies.

Fair Price

Naimi, representative of the Organisation of the Petroleum Exporting Countries' biggest oil producer, reiterated that $75 a barrel was a "fair and reasonable" price for oil. Benchmark U.S. crude oil futures for January (CLc1) fell below $34 on Friday.

Cheaper oil prices are immediately attractive to consumers but lead to under-investment and supply shortages further down the line.

"In the short term consumers love the idea," Eni Chief Executive Paolo Scaroni said.

"There is a position that will be good for the consumer today and good for the consumer tomorrow and this will be more in the region of $60-$70."

OPEC this week announced a cut in oil supplies to try to balance supply and demand and put a floor under sagging prices.

OPEC Secretary-General Abdullah al-Badri said investment was slowing across the whole of the energy industry: "We are already hearing about cutbacks to spending on new projects," he said.

Tanaka agreed: "We have seen a string of project delays and cancellations - the list is getting longer and longer by the day," he said.

"If investment delays and cancellations persist a real risk of supply crunch will emerge which could choke off economic recovery once demand finally rebounds."