OPEC Agrees to Cut Crude Production

[Jack]

OPEC ministers anxious to arrest a deep price slide and yet cushion a bruised economy said Thursday they agreed they must cut output, but had not decided by how much. International benchmark US crude has slumped by more than 50% from a record high of US$147.27 hit in July. On Thursday it closed just shy of $68 a barrel. The plunge prompted OPEC to bring forward to today an emergency meeting originally set for Nov. 18 and it has revived memories of the 1998 price collapse when oil sank below $10. Venezuelan Minister of Energy and Petroleum Rafael Ramirez said there was a risk oil could fall back to that level and OPEC needed to act without delay. "There`s going to be consensus to take a very, very, very fast action," he said of today`s meeting, adding his view was the group needed to agree an initial cut of at least a million barrels per day. An OPEC source said the cartel`s core Gulf producers would prefer a reduction of around one million bpd, but others in the group wanted a cut of closer to twice that. Saudi Arabian Oil Minister Ali al-Naimi said merely the oil price would be determined by the market. The only OPEC producer to be pumping significantly above its official output target, Saudi Arabia would be expected to lead any reduction in supplies. As economic slowdown has destroyed demand for oil and stocks have built up, most OPEC ministers have said a cut was essential to limit oversupply, stave off a price collapse and protect their own economies. But they also need to avoid inflicting more pain on their consumers or they could damage demand further still. OPEC president Chakib Khelil of Algeria was among those who said cuts could be in stages and it could take more than one meeting to strike the right balance between supply and demand and between producer and consumer needs. Adding to the difficulty of its task, however deep a cut it agrees, OPEC could struggle to enforce it.

(Calgary Herald 081024)