BBC

Saturday, 23 December, 2000, 03:50 GMT Oil output cut looms

Opec leaders want to ensure the price does not tumble The world's major oil producers could cut oil output early next month in an effort to raise prices, which have fallen below an agreed benchmark level.

The president of Opec, Ali Rodriguez of Venezuela, said on Friday that the exporting cartel would cut production by 500,000 barrels per day (bpd) if its export price remained below $22 per barrel for 10 market days.

The Organisation of Petroleum Exporting Countries (Opec) is to meet on 17 January in Vienna to consider calls from several members, including Iran, Kuwait and Indonesia, for a production cut of one million bpd.

"We are going to wait for the 10 days established (in our agreement), and when they are completed, if the price remains below $22 per barrel there would be a cut of 500,000 bpd," said Mr Rodriguez, who is also Venezuelan Energy and Mines Minister.

"If the situation continues there would be complementary or additional cuts, but Opec is going to meet on 17 January, do its analysis and take the appropriate decision."

Opec targets

In an attempt to stabilise the highly volatile oil price, Opec adjusts production levels, with the aim of keeping the price within the $22-$28 band.

Opec's rules say that oil production should be increased by 500,000 bpd if the oil price remains above $28 for 20 days, and cut by the same amount if the price remains below $22 for the same length of time.

But the guide price Opec uses - a combination of seven global crude benchmarks - dipped below $22 on Friday, after losing almost $7 during December.

The oil price has now fallen more than 30% since the autumn peaks above $35 which led to petrol protests on the streets of Europe.

Pressure to lower prices

Opec agreed to increase the amount of oil it produces on four occasions, under pressure from the US and Europe, to force the price lower.

But there have been growing fears from the oil producing countries that the output rise may set the scene for another sharp fall in the oil price, to well below their target range.

The Opec basket of oil prices is wider in range than the benchmark price used in the UK - of Brent crude for February delivery - which closed on Friday's shortened trading day at $23.66, up just 5 cents from Thursday when it hit an eight-month low.

-- Rachel Gibson (rgibson@hotmail.com), December 22, 2000