OPEC Must Consider If Further Cut Needed - Nigeria

Venezuela has said it will propose OPEC reduce production by a further 1 million bpd when it meets on Dec. 17.

Nigeria's oil minister said on Wednesday that OPEC needed to assess whether the market was oversupplied before deciding on a further production cut, saying other factors may be driving price volatility.

The Organization of the Petroleum Exporting Countries will meet next month in Algeria to discuss policy after its agreement last month to cut 1.5 million barrels per day (bpd) from supply failed to reverse falling prices.

"I think we need to look at the market and see if there is need for cut, because we took out 1.5 million bpd but to no effect," Oil Minister Odein Ajumogobia told Reuters.

"Even since our last OPEC meeting the price volatility has been quite excessive, going to highs of $65 and going down to as low as $55 in a period of two weeks. So I think there may be other factors at play," he said.

Ajumogobia said just after OPEC cut production last month that the move was aimed at restoring the balance between supply and demand but that it could not affect the impact of other non-fundamental factors on the crude price.

Venezuela has said it will propose OPEC reduce production by a further 1 million bpd when it meets on Dec. 17 and Iran has also suggested a new production cut might be needed.

Ajumogobia said any decision by OPEC, source of more than a third of the world's oil, to cut production further had to be based on facts and data and that it may just be a question of enforcing the previous agreement more strictly.

"It may simply be that people are not complying with the cut. For us in Nigeria we did comply, but if some countries have not complied then it means the impact of the 1.5 million bpd has not been felt in the market," Ajumogobia said.

"If Venezuela is arguing that the market is still over supplied ... when we get to the meeting we will discuss it and see what the situation is based on the data that will be presented," he said.

Nigeria, Africa's most populous nation, may have to cut back spending and increase foreign borrowing next year because of the lower oil price and any limits on production.

Violence in the Niger Delta, its oil heartland, and funding shortfalls at its joint ventures with foreign oil firms mean it is in any case struggling to meet its OPEC quota. It is pumping around 2 million bpd, well below its 3 million bpd capacity.

Asked what oil price Nigeria, the world's eighth biggest exporter, would be comfortable with, Ajumogobia said:

"For me, anything within the region between $70 and $80 will be a price we in Nigeria will be happy with."

Nigeria has set a benchmark oil price of $45 in its draft 2009 budget, which is due to go to parliament for approval.

"I think the $45 benchmark was a conservative choice ... but I think if you want to implement your budget then you must plan," Ajumogobia said.

"If our benchmark remains $45 and it turns out that in the course of the year the oil price goes up to $70 or $75 we can always pass a supplementary budget," he said.