Oil price fall unnerves Gulf states

January's Opec meeting may give oil prices a boost

By Middle East correspondent Frank Gardner

Arab oil producers are viewing the recent fall in oil prices with nervousness - some of them fearing another recession.

The benchmark price for Opec crude oil fell below $22 a barrel on Friday - about one-third less than in the autumn.

The Arab producers are now able to say: "We told you so, there's more than enough oil on the world market."

Opec, the cartel of oil producing and exporting countries, has increased its production levels four times this year, mainly to appease western consumers who feared a worldwide shortage.

No supply shortage

When the price of oil was still above $30 a barrel in November, the US Energy Secretary, Bill Richardson, put heavy pressure on Opec to turn up production yet again.

OIl producers have done well from the high oil price

But Opec producers called for patience, and now they have been proved right.

Their increased output has taken effect, and prices have dropped.

On Sunday, a Saudi Oil Ministry spokesman, Ibrahim Al-Muhanna, said his country had been right to blame high oil prices on speculators and other technical factors rather than on any supposed shortage of supply.

But now the prices have dropped, oil producers are starting to get nervous.

Calls for output cut

Memories are still fresh of the widespread recession caused to their economies by low oil prices two years ago.

Kuwait and Iran are now calling for Opec to cut its collective production by a million barrels a day in order to shore up prices.

Like all oil producers, Saudi Arabia has reaped huge benefits from this year's high oil prices, but Saudi officials are also aiming for a stable price in a range of $22 to $28 a barrel.

At the coming Opec meeting on 17 January, a decision is likely to be taken that will determine the direction of that oil price for the months to come.