Opec ‘to cut oil production’

Oil prices have risen back above $60 a barrel on the expectation that producers will cut output by one million barrels a day.

Oil prices had dropped 23 per cent since mid-July
Oil prices had dropped 23 per cent since mid-July

The Organisation of Petroleum Exporting Countries will make the cut after prices dropped 23 per cent in less than three months, a senior delegate said.


World markets are oversupplied with crude and fuel stocks in the US are at a 7-year high which has caused prices to fall from a peak of $78,40 in mid-July.


The exact date for the move is still to be decided, the delegate added.


The US expressed dismay at the decision. Sam Bodman, the energy secretary, said he would tell Opec ministers that the world still needed all the oil they could pump as they head into winter. He pointed that at $60 a barrel oil was still near record highs.


“We still need oil for sure. We still need all the oil we can get,” Bodman told Reuters news agency.


December meeting


The 11-member organisation is due to meet on December 14 in Nigeria.


Edmund Daukoru, the Opec president, said that some members wanted an emergency meeting before then, but he thought it would be worthwhile only if the group were ready to make a substantial cut from its ceiling of 28 million barrels per day.


“If we meet now, to have an impact on the market, … it would have to be substantive,” said Daukoru, who is also Nigeria’s petroleum minister.


A formal position on oil cuts will only be agreed after consultations, he added.


Saudi Arabia will reportedly reduce its production by 300,000 barrels a day from September’s 9.1 million barrels a day, the senior delegate said, taking the kingdom’s production to its lowest since May 2004.


No decision made


But a spokesman for Saudi Arabia’s ambassador to the US told Associated Press that there was no plan in Riyadh to cut supplies in order to prop up prices. “A decision hasn’t been made,” he said.


This will be Opec’s first output cut since April 2004.


Analysts have expected a cut for some time, especially after Nigeria and Venezuela said last week they were making unilateral reductions.


“The marketing departments of these countries are finding it difficult to move their oil. And high global inventories are of grave concern,” said Gary Ross of New York’s PIRA Energy.


“At the end of the day, Opec members are trying to protect their revenue and, in turn, the oil price.”


Oil prices have tripled since the start of 2002.

Source: Reuters

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