Mexico, among others, agree to cut oil production to raise prices Bloomberg - 11/12/2001

RIYADH, Saudi Arabia - Saudi Arabia, Venezuela and Mexico, three of the biggest oil suppliers to the U.S., will cut production this week to remove a glut and boost prices, hovering near two-year lows, the official Saudi news agency reported.

The three oil-rich nations "agreed on the need to take the necessary measures in the coming days to cut the current output surplus," officials of the three nations said in a statement. Saudi oil minister Ali al-Naimi and his counterparts from South America, Mexico's Ernesto Martens and Venezuela's Alvaro Silva, delivered the statement after meeting in Madrid, the official SPA reported.

Mexico, which isn't a member of the Organization of Petroleum Exporting Countries, joins non-OPEC oil producer Russia in reversing its opposition to cooperating with OPEC in its efforts to reduce excess oil supplies from the market and boost prices that have fallen close to 30 percent over the last two months.

"Prices could climb to near 25 dollars a barrel with the cooperation of non-OPEC states," said Mohammed Abduljabbar, an analyst with the Washington-based Petroleum Finance Company.

"I'm still skeptical that non-OPEC might say one thing and do another," he said.

The 11 members of OPEC will meet in Vienna on Wednesday to consider slashing production for the fourth time this year. Saudi Arabia, OPEC's largest producer, has said it wants oil states to slash at least 1.5 million barrels a day from the market.

The exporters group wants to see oil prices return to their target range of 22 to 28 dollars a barrel.

The group of oils OPEC monitors closed on Thursday at 18.51 dollars a barrel, though it should have moved higher on Friday after Russia announced its intention to cut exports. OPEC will release Friday's closing oil price today.

Surplus

Producers are concerned a surplus will build up this winter as demand weakens from a slowing world economy. Anemic demand, made worse by the Sept. 11 terrorist attacks on the U.S., sent energy prices in New York down 7.7 percent in October, the biggest drop since August 1989, the Labor Department reported.

OPEC has made agreements with Russia and Mexico before. In April 1999, non-OPEC producers Mexico, Norway, Russia and Oman agreed to reduce world oil output for one year, by a total of about 7 percent. That year, Russian oil exports actually increased by 400,000 barrels a day, the International Energy Agency reported.

The three ministers said in their joint statement that "despite producers' efforts to restore balance to the market, supply greatly exceeds demand, not only because of lower demand but also due to an increase in the output of non-OPEC producers," SPA reported.

Mexico's agreement to cooperate with OPEC should avert a price war in the 1.5 billion dollar-a-day oil market, analysts said. Iran, Qatar and the United Arab Emirates, which had expressed their reluctance to reduce output for a fourth time this year without non-OPEC states following suit, had warned of a price war between producers if non-OPEC hadn't joined in.

Norway, the world's second-largest oil exporter outside OPEC after Russia, still maintains its refusal to reduce production.

-- Anonymous, November 12, 2001