http://www.canoe.ca/CNEWSGas01/0106_opec-ap.html

Saturday, January 6, 2001

OPEC to cut production, Kuwaiti oil minister says

Reduction to fall between 1.5-2 million barrels a day

By DIANA ELIAS-- The Canadian Press

KUWAIT (AP) -- Members of the Organization of Petroleum Exporting Countries have agreed to cut production by 1.5 to two million barrels a day to boost prices, Kuwait's oil minister said Saturday.

The state-run Kuwait News Agency quoted Sheik Saud Al Sabah as saying Ali Rodriguez, secretary general of the cartel, informed him of the consensus among OPEC's members. He did not provide further details.

In Riyadh, Saudi Arabia, a Saudi official speaking on condition of anonymity said there were extensive contacts between OPEC member countries to reduce production.

"Production will be decreased by between 1.5 million and two million barrels a day, with the likely figure to be 1.7 million," the official said.

He said this week will witness further talks among member states, especially between Saudi Arabia and Iran. Saudi Oil Minister Ali Naimi recently held talks with Rodriguez and Venezuelan Oil Minister Alvaro Silva Calderon, the official said without providing further details.

Iran's OPEC governor, Hussein Kazempour Ardebili, was quoted Saturday as suggesting OPEC could decide on cuts of as much as three million barrels a day in the coming months, beginning with its Jan. 17 meeting in Vienna.

"If OPEC decides to cut production by 1.5 million barrels on Jan. 17, then there will be every possibility that it would again institute cuts by another 1.5 million barrels in the second quarter of the current year," Ardebili was quoted saying in comments published Saturday by the daily Aftab Yazd.

"However, if it decides to reduce production by two million barrels in the wake of the January meeting, then OPEC's production would drop (again) by another one million barrels at the beginning of the spring," he added.

OPEC has increased production four times over the past year, totalling 3.7 million barrels, in order to bring prices down from more than $30 US a barrel -- which had consumer nations, especially in Europe and the United States, pressing hard for more oil to be put on the market. OPEC countries produce 26.7 million barrels a day, or 40 per cent of the world's oil.

A mild European winter and replenished crude inventories prompted a more than 25 per cent drop in international oil prices over the past month. But prices have climbed in recent days along with confidence the 11-member cartel will decide to slide back production during its meeting in Vienna. On Friday, the benchmark Brent crude from the North Sea was at $25.18 per barrel.

A day earlier, Rodriguez said OPEC was worried that replenished inventories would coincide with a traditional drop in demand in the second quarter of the year to produce a price crash.

In Iraq, Oil Minister Amer Mohammed Rashid said a coming reduction would "bring stability back to the market." Rashid called for stronger unity among OPEC members and said they should be independent from outside pressures in order to stabilize the oil market.

The Iraqi oil minister said his country is exporting around 2.3 million barrels per day out of a total production of three billion barrels.

Under the cartel's price-band mechanism, OPEC will cut production by at least 500,000 barrels a day if the price of the group's benchmark crude stays below $22 a barrel for 10 consecutive days before the Vienna meeting.

OPEC members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Rodriguez said Thursday that non-OPEC members Mexico, Oman, Russia and Kazakstan would co-operate with the cartel's efforts to reduce world crude supply.

-- (in@energy.news), January 07, 2001