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OPEC willing to make sizeable oil output cut
(Reuters)
Updated: 2006-10-05 17:40
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OPEC ministers are prepared to make a significant cut in oil output to halt a sharp drop in prices, sources within the group said on Thursday.
An OPEC delegate said "the direction and spirit are there" for OPEC, which pumps over a third of the world's oil, to make a meaningful cut as the US economy slows and rival producers bring new supplies to market.
Any reduction would have to be about a million barrels per day to stem a slide that has wiped nearly $20 or 25 percent off the price of crude since mid-July, OPEC trackers say.
The Financial Times reported on Thursday that OPEC was poised to cut at least one million barrels, or four percent of daily production.
The 11-member organization will meet in Nigeria on December 14.
But some states, including the world's biggest exporter Saudi Arabia, are already trimming supplies, shipping sources and customers have said.
"Consensus is building within OPEC to agree a major cut," a second OPEC source told Reuters.
OPEC's sixth biggest producer Nigeria and fourth biggest Venezuela last week announced token output cuts, totalling 170,000 barrels per day or less than one percent of OPEC's output.
But since then oil prices have fallen further on rising US stockpiles, drawing the first reaction from OPEC's core Gulf producers.
Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah raised the chance of broader action on Wednesday, telling Reuters that Kuwait may also cut back if prices continued to fall sharply.
The OPEC delegate said that while Saudi Arabia had not commented on the market so far, the fact that it hiked the price of its heavier crude to Europe on Wednesday indicated the kingdom may be cutting supply.
Iran and Libya also support a cutback while the UAE is also likely to do so, the Financial Times newspaper reported on Thursday, quoting OPEC insiders.
"Consultations are ongoing," an OPEC official told Reuters on Thursday. "There is concern about oil prices and volatility."
U.S. oil prices have trebled in the space of four years, but are currently far below their mid-July peak of $78.40.
"Obviously, OPEC has seen that the world economy can keep going at $65 to $75, so they don't see any reason why prices should fall too much further," said Andrew Harrington, a resource analyst at ANZ Bank.
On Wednesday, Saudi Arabia's ambassador to the United States reiterated the kingdom's long-standing view that there is an abundance of crude oil.
The price for OPEC's own basket of crudes fell to $54.19 a barrel on Wednesday.
OPEC members have sent conflicting signals on price. Iran's oil minister said last month he wanted to see OPEC oil at or above $60, equating to around $65 for US oil.
At the other extreme, Kuwait's oil minister said on Wednesday he would be worried by U.S. oil at $50, putting the OPEC basket at around $45.
An OPEC delegate said "the direction and spirit are there" for OPEC, which pumps over a third of the world's oil, to make a meaningful cut as the US economy slows and rival producers bring new supplies to market.
Any reduction would have to be about a million barrels per day to stem a slide that has wiped nearly $20 or 25 percent off the price of crude since mid-July, OPEC trackers say.
The Financial Times reported on Thursday that OPEC was poised to cut at least one million barrels, or four percent of daily production.
The 11-member organization will meet in Nigeria on December 14.
But some states, including the world's biggest exporter Saudi Arabia, are already trimming supplies, shipping sources and customers have said.
"Consensus is building within OPEC to agree a major cut," a second OPEC source told Reuters.
OPEC's sixth biggest producer Nigeria and fourth biggest Venezuela last week announced token output cuts, totalling 170,000 barrels per day or less than one percent of OPEC's output.
But since then oil prices have fallen further on rising US stockpiles, drawing the first reaction from OPEC's core Gulf producers.
Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah raised the chance of broader action on Wednesday, telling Reuters that Kuwait may also cut back if prices continued to fall sharply.
The OPEC delegate said that while Saudi Arabia had not commented on the market so far, the fact that it hiked the price of its heavier crude to Europe on Wednesday indicated the kingdom may be cutting supply.
Iran and Libya also support a cutback while the UAE is also likely to do so, the Financial Times newspaper reported on Thursday, quoting OPEC insiders.
"Consultations are ongoing," an OPEC official told Reuters on Thursday. "There is concern about oil prices and volatility."
U.S. oil prices have trebled in the space of four years, but are currently far below their mid-July peak of $78.40.
"Obviously, OPEC has seen that the world economy can keep going at $65 to $75, so they don't see any reason why prices should fall too much further," said Andrew Harrington, a resource analyst at ANZ Bank.
On Wednesday, Saudi Arabia's ambassador to the United States reiterated the kingdom's long-standing view that there is an abundance of crude oil.
The price for OPEC's own basket of crudes fell to $54.19 a barrel on Wednesday.
OPEC members have sent conflicting signals on price. Iran's oil minister said last month he wanted to see OPEC oil at or above $60, equating to around $65 for US oil.
At the other extreme, Kuwait's oil minister said on Wednesday he would be worried by U.S. oil at $50, putting the OPEC basket at around $45.