Dubai - OPEC will take one million barrels of oil a day off oversupplied
world markets as soon as possible with its first output cut in more than two
years, OPEC officials said on Thursday, sending oil prices $1.50 higher.
The world's biggest oil exporter Saudi Arabia will shoulder most of the
burden as OPEC moves to address a 25 percent drop in prices since mid-July and
oil stocks that are running at a 7-year high in top consumer the United States.
The organization that pumps over a third of the world's oil is curbing
supplies by just over 3 percent. It may make deeper cuts at its next meeting on
December 14 in Abuja, one official said.
"The goal now is to cut actual oil production by 1 million barrels daily as
soon as possible but the exact date is still being worked out," a senior OPEC
delegate told Reuters.
Nine OPEC countries are taking part in the supply curbs and will cut their
"fair share" from overall OPEC production of 29.47 million bpd in September, the
delegate added.
Only Iraq, exempt from quotas, and Indonesia, a net importer, will not
participate. All of this could pave the way for a realignment of OPEC quotas,
and tricky negotiations, at OPEC's December meeting.
Saudi Arabia Leads Way
Saudi Arabia will reduce its production by 300,000 bpd from September's 9.1
million bpd, the delegate said, taking the kingdom's production to its lowest
since May 2004. The news contradicts a Financial Times report that Saudi Arabia,
OPEC's most influential member, was opposed to curbing supplies.
This will be OPEC's first output cut since April 2004.
The group last changed its ceiling in July 2005 with a 500,000 bpd increase
in response to rising demand from the United States and China's fast-growing
economy and a seemingly relentless rise in the price of oil.
But the situation has changed in recent months with a stumbling U.S. economy
and a rapid descent in the U.S. oil price from its $78.40 peak in mid-July.
OPEC delegates said the organization's primary concern was the high level of
global fuel stocks.
"OPEC is closely watching developments in oil markets, especially crude
stocks, which we've seen rising gradually. This might create further pressure in
the market," one delegate said.
"OPEC is concerned about prices but the most important thing they are
concentrating on are inventory levels."
Analysts have expected OPEC to cut output for some time, especially after
Nigeria, which currently holds the OPEC presidency, and Venezuela announced last
week they were making unilateral reductions.
Kuwait, one of OPEC's core Gulf members, added impetus on Wednesday by
stating its readiness to join in the reductions if necessary.
"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."
OPEC will have plenty of time to measure the impact of its action before its
next ministerial meeting in Abuja on December 14.
U.S. oil rallied on the OPEC news, hitting $60.97 a barrel, up nearly $1.56,
at one point. At 1207 GMT it stood at $60.76. Oil prices have tripled since the
start of 2002.
