Opec set to cut oil production

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http://news.bbc.co.uk/hi/english/business/newsid_1119000/1119254.stm

Monday, 15 January, 2001, 21:09 GMT

Opec set to cut oil production

The oil minister of Saudi Arabia has indicated the oil producing countries of Opec will announce big reductions in oil production later this week raising fears of rising prices and potential damage to economies around the world.

The minister, Ali al-Naimi, said in Vienna on Monday that a cut of about 5% or 1.5 million barrels is necessary to stabilise prices.

And Venezuela's President Hugo Chavez has also expressed his determination to cut oil production.

"In a few days Opec will meet. We are going to cut production by at least one million barrels a day," Chavez told the National Assembly. "There is an unbreakable resolve within Opec. Some are even proposing cuts of up to three million barrels a day," he added.

Western concern

But the West, especially the US, are concerned that production cuts and the ensuing price hikes will have an unhealthy effect on the world economy.

US Energy Secretary Bill Richardson has already urged Opec not to go ahead with steep cuts in oil production, and has been touring the Middle East to negotiate with government leaders.

But his pleas seem to have fallen on deaf ears, with Saudi Arabia now also advocating a sizeable cut.

Saudi Arabia has a great deal of power within the cartel, but is usually seen as one of the more moderate members.

The determination to cut prices follows a drop of almost $10 in the price of oil from the five- year high of above $35 a barrel achieved last autumn.

Price spike ahead

Former Saudi oil minister Sheikh Ahmad Zaki on Thursday predicted a significant price hike in the second half of January when the Opec cuts will coincide with a shortage of Iraqi oil.

Iraq suspended exports during December due to a dispute with the UN, and the full impact will be felt in the market during January when the oil tankers were due to arrive at their destinations.

It was price rises such as the one now predicted for late January that caused soaring petrol pump prices and fuel protests in Europe and elsewhere in September.

The news emerged too late to have an impact on the London markets which closed at $26.27, up just 0.49 cents from the previous close.

But share prices for BP and Shell rose 17p and 18p respectively during the day, on expectations of higher selling prices for their output of crude oil.

-- (in@energy.news), January 15, 2001


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