Aljazeera reports that member states have decided to maintain the existing official output ceiling of 27 million barrels per day, although they are currently producing about 1.1 million barrels more than that figure.
Opec ministers meeting in Cairo have agreed to cut production by bringing output into line with existing quotas, according to Aljazeera.
Ministers from Kuwait, the UAE, Libya, Venezuela and Algeria urged the group on Thursday to cut back on more than one million barrels per day (bpd) of supply in excess of quota targets after oil prices this week fell to four-month lows.
“It looks like everybody supports to fully comply … and to have maybe an early meeting in the beginning of February,” Kuwaiti Oil Minister Shaikh Ahmad al-Fahd al-Sabah said after meeting with fellow Gulf producers, including Saudi Arabia.
Producers fear rising inventories in consuming nations could further lower prices which have already dropped by $13, or nearly 25%, from record highs in late October.
Top Opec producer Saudi Arabia’s Oil Minister Ali al-Naimi, who has played down fears of a glut, said on Thursday he came to the meeting with an open mind.
“It looks like everybody supports to fully comply … and to have maybe an early meeting in the beginning
Shaikh Ahmad al-Fahd al-Sabah, Kuwaiti Oil Minister
Opec’s second biggest producer Iran said the group would need to cut an existing 27 million bpd output target for the second quarter when demand seasonally declined.
Kuwait said Opec should consider a 500,000 bpd cut in quotas for the second quarter.
“All the Opec suppliers want to manage the market and not to witness a shock,” Iranian Oil Minister Bijan Zanganeh said.
US crude was up 56 cents at $42.50 a barrel on Thursday.
The Organisation of the Petroleum Exporting Countries has been producing at the highest level in 25 years to meet rising demand in the US and China and compensate for disruptions to supply from Iraq.
“Overproduction has achieved its purpose of bringing the price down,” said Nigerian presidential adviser on petroleum Edmund Daukoru. “It was not meant to crash the price, it was meant to moderate the price.”
Consumer nations have urged Opec not to pull back production, saying oil stocks must be rebuilt to calm volatile prices and underpin economic growth.
Opec looks set to reduce output
“Given where inventories are, Opec production probably needs to stay about where it is. We think on average we’ll need more Opec crude next year than we got this year,” said Guy Caruso, head of the US government’s energy information adminis-tration.
Most of the burden of any Opec output restraint would fall on top producer Saudi Arabia as it has been producing around 9.5 million bpd since August, 890,000 bpd over its quota limit.
Most to lose
As the world’s biggest oil power, Saudi Arabia has most to lose if a further spike in prices endangers long-term fuel demand by damaging economic growth.
Winter heating fuel stocks in major consuming centres are low and will come under strain if the northern winter is severe, analysts warn. A fall in US natural gas stocks helped push prices up on Thursday.
Crude prices are still around 30% above the start of the year but a fall in the dollar’s value has further eroded Opec’s revenues from its sales, denominated in the US currency.
Steep discounts for the group’s lower-quality crude oil have undermined revenues, especially for Iran, Kuwait and Venezuela, which produce a lot of heavy, sulphurous oil.
“By pulling back on their heavier, sour production, the Saudis will be reducing the differentials that have incensed the major sour producers in the organisation,” said Washington DC-based PFC Energy in a report.