'Almost a Conviction' in OPEC for Oil Cut

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Monday February 19, 12:41 pm Eastern Time

'Almost a Conviction' in OPEC for Oil Cut By Tom Ashby

CARACAS (Reuters) - OPEC Secretary-General Ali Rodriguez said on Monday there was ``almost a conviction'' in the oil exporting cartel to cut production ahead of a forecast drop in demand in the second quarter of the year.

Speaking in a live radio interview from London, Rodriguez said the supply curb could be up to a million barrels per day (bpd) ``in the worst case scenario.''

OPEC oil ministers, who control two-thirds of global exports, are expected to decide on output levels on March 16 in a meeting at their Vienna headquarters.

The 11-member group is keen to hold on to price gains generated by drastic output cuts in 1999, which eliminated a chronic oversupply in world markets and created the biggest oil boom in 17 years in 2000.

Asked whether OPEC had already decided to announce a further reduction in output next month, Rodriguez replied: ``Not yet, but in any case there is an inclination, almost a conviction, that we have to cut production because normally in the second quarter there is a sharp drop in demand and, of course, prices.''

The cartel has a target price band of $22 to $28 per barrel, and an informal mechanism to keep prices in the band by adjusting supply. Its reference crude oil price stood at $24.90 on Friday, according to the group's secretariat.

Rodriguez said global oil demand normally falls by two million bpd from March to June, although OPEC's supply cut of 1.5 million bpd in February meant the next cut would be smaller.

``In the worst case scenario, the maximum (cut) would be of a million bpd,'' Rodriguez said.

The Arab-dominated group supplies about 40 percent of the planet's daily 77 million bpd demand. Rodriguez said the world oil demand growth forecast had been cut from 1.5 million bpd to 1.4 million bpd this year, but east Asia was key.

``There is a lot of concern about the performance of the U.S. economy ... and the impact this could have in the Asian region,'' said Rodriguez, a former Venezuelan Energy and Mines Minister.

``That is where we expected to see demand rising the fastest, by 800,000 barrels a day this year,'' he added.

The bullish talk comes as Venezuelan President Hugo Chavez, a leading OPEC price hawk, is in the middle of a six-day trip to the world's No.1 exporter Saudi Arabia.

Chavez said he would discuss with Saudi King Fahd the ''unyeilding defense'' of oil prices.

A Gulf source familiar with Saudi oil policy said last week that OPEC was likely to cut supply again because global oil inventories were rising, demand growth slowing and Iraqi exports returning to normality.


-- Martin Thompson (mthom1927@aol.com), February 19, 2001


Are these "production cuts" a euphemism for (at least a partial) oil embargo, due to Arab anger over U.S. airstrikes in Iraq? Does this foreshadow worse to come if the attacks are repeated, or if the Israeli-Palestinian conflict spirals out of control?

-- Robert Riggs (rxr.999@worldnet.att.net), February 19, 2001.

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