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OPEC moves on slashing output to bolster prices
AP
Nigerian Oil Minister and OPEC president Edmund DaukoroAFP
PARIS
Petroleumworld.com 10 12 06The 11 members of the OPEC oil cartel have agreed to slash output by a million barrels a day, the OPEC president said Wednesday, in a move aimed at shoring up sliding world crude prices.
"Our position to cut one million bpd (barrels per day) has received consensus. All members have agreed" on the figure, Nigerian Oil Minister Edmund Daukoro told AFP, adding that the cut would go into effect next month.
However, the OPEC secretariat in Vienna, questioned by AFP, could not immediately confirm that an accord had been struck.
OPEC spokesman Tareq Amin said there was "nothing new" to signal and that ministers were still in consultations.
Oil markets reacted cautiously to the news, with prices of light sweet crude for November delivery sliding 24 cents to 58.28 dollars a barrel in New York.
In London Brent crude rose 12 cents to 59.46 dollars a barrel.
Daukoru told AFP in Lagos that OPEC members, whose agreed upon production ceiling is currently 28 million barrels a day, could decide on the exact breakdown for the reduction later Wednesday.
"I hope that by the end of today we will get a consensus on the distribution," he said.
Daukoru had proposed the cut in a letter to his ministerial counterparts on Sunday.
In Qatar Energy Minister Sheikh Abdullah bin Hamad Al-Attiyah said the Gulf emirate backed the one-million-barrel-a-day reduction.
Earlier Wednesday a source close to the OPEC chief, asking not to be named, had said the Organization of Petroleum Exporting Countries would not convene an emergency meeting to endorse a production cut.
Any action to reduce daily production by one million barrels would "not be an 'OPEC decision' as such" but a "voluntary decision by each member".
The oil market has been waiting more than two weeks for a clear signal from OPEC in reaction to a 25 percent plunge in crude prices in the last two months.
Until now, market participants have been confronted with contradictory statements from one OPEC member or another or individual decisions to reduce output by Nigeria and Venezuela.
Analysts said market reaction would likely reflect a realization that many OPEC members are already producing under their assigned quotas. As a result, many traders are sceptical about reports of an actual cut in output.
OPEC countries, apart from Iraq which is not included in the quota system, are currently turning out an estimated 27.5 million barrels a day, according to analysts at Barclay's Capital.
A decrese to an overall quota of 27 million barrels a day would in effect mean a real reduction of only 500 barrels a day.
In its monthly report released Wednesday, the Paris-based International Energy Agency estimated that OPEC had already lowered output in September to 27.8 million barrels a day, or 29.8 million including Iraq, and said the cartel's individual quotas have largely been ignored for several months.
By cutting output OPEC in fact runs a risk of driving prices down further, as such a move would contribute to reconstituting a "security cushion" -- or excess production capacity. The market for several years has deplored the absence of such a cushion.
AFP 11 1544 GMT 10 06
Copyright© 2006 AFP. All Rights Reserved.
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