OPEC to cut oil output next year
The Organization of Petroleum Exporting Countries (OPEC) agreed Friday to reduce crude supplies by one million barrels a day from the beginning of next year to avoid further slide in oil prices.
"(OPEC) Member countries have agreed to collectively reduce the over-production by one million barrels per day from their current actual output, effective on Jan. 1, 2005," the 11-member bloc said in a statement at the end of its ministerial meeting held in Cairo.
OPEC ministers also decided to keep its total output quota of 27 million barrels per day unchanged.
The decision showed OPEC is trying to prevent the oil price from receding too far after it reached a peak at more than 55 US dollars a barrel in late October, which prompted many oil producers to call for cutbacks in supply.
"During past weeks, the oil prices have fallen sharply. Wes hould take action to stop it, and the first step is cutting the surplus output and the quotas should be obeyed strictly," said Kuwaiti Energy Minister Sheikh Ahmad Fahd al-Sabah.
Algeria's Energy Minister Chakib Khalil echoed the idea, saying: "The downward trend seemed to us to be a bit too rapid, and it appeared that if we did not take this sort of decision the prices would not stabilize and we would find ourselves in a situation where we couldn't control the stability of the market."
Top OPEC producer Saudi Arabia will shoulder half the total cut. The kingdom's planned 500,000 barrels per day reduction would bring its output to around 9 million bpd -- still around 225,000 bpd above its quota.
OPEC Secretary General Purmono Yusgiantoro of Indonesia called for stability in the oil markets after months of "excessive speculative activity".
He said the group would reassess its current price band at the next meeting on Jan. 30, 2005 in Vienna, Austria, which will review market developments as oil prices are expected to come under growing pressure during the "seasonally, lower-demand second quarter".
The decision will disappoint consumer nations which have urged OPEC not to pull back from current production levels because oil inventories must be rebuilt to underpin economic growth and calm volatile prices.
In a bid to ease up fears on possible price hike after the supply cut, the ministers said that they are committed to maintaining the stability of the oil market.
"The conference reaffirmed its determination to take all measures deemed necessary to keep market stability and maintain prices at reasonable levels, for the benefit of producers and consumers alike," the statement said.
The OPEC, which supplies about 40 percent of the world's oil, has been producing at the highest level in 25 years so as to meet increasing demand in the world market. Experts say that the bloc is currently pumping one million to 1.5 million bpd of surplus production over the existing target quota of 27 million bpd.
However, increasing stocks, slowing economies, high production by both OPEC and non-OPEC countries and a relatively mild Northern Hemisphere winter collectively led to a 25 percent fall in crude prices in the past few weeks.