Oil minister warns of price war and crash

An oil price war will result if non-Opec nations do not cooperate with the oil cartel, Qatari Oil Minister Abdullah bin Hamad al-Attiyah warned today.

‘‘I’m afraid of that, but this will be the result, because Opec has limits and red lines it can’t cross in reducing its production,’’ He said.

The Organisation of Petroleum Exporting Countries produces about 40% of the world’s crude. The cartel has been holding informal talks to try to stop the downward flow of crude prices that began after the September 11 terrorist attacks on the United States.

Prices have been further aggravated by a slumping economy.

Al-Attiyah, who was in Abu Dhabi to attend a finance conference, warned of a scenario similar to 1998, when oil prices fell below 10 dollars.

‘‘1998 is close. When prices crashed, all producers were hit. My advice to producers is to have a good memory, and be fully willing to cooperate with Opec to avoid a repeat of 1998,’’ he said.

The minister said a production cut of one million barrels a day was ‘‘realistic, but without the help of other non-Opec countries, the organisation will be under immense pressure.’’

He added that the cartel was not willing to accommodate losses in price and market share.

Under Opec’s price band accord, if the price of its basket of seven crude oils rises above 28 dollars a barrel for 20 consecutive trading days, the cartel increases output by 500,000 barrels a day.

Conversely, if the price falls below 22 dollars a barrel for 10 consecutive trading days, Opec is obliged to reduce output by 500,000 barrels a day.

Al-Attiyah said that a global economic recession will lead to more pressure on oil prices.