Posted on 10/08/2006 12:36:35 PM PDT by thackney
ALGIERS/DUBAI (Reuters) - OPEC is expected to make formal on Monday a deal to remove 1 million barrels a day of crude from oversupplied markets, an OPEC source said, as ministers lined up to support the cut.
Iran, OPEC's second biggest producer, and Algeria on Sunday publicly backed the reduction, OPEC's first since April 2004. The plan was made public on Thursday by a senior OPEC delegate.
"I think there is more or less consensus for 1 million bpd," OPEC President Edmund Daukoru told Reuters by telephone on Sunday. "The reference point is the (official) 28 million bpd ceiling."
An OPEC source said Daukoru had written to oil ministers in the last two days seeking their backing for the supply curbs.
"It is expected that there will be a decision on Monday to cut one million barrels per day from the official ceiling after consultations between the ministers," the source told Reuters.
Algerian Energy and Mines Minister Chakib Khelil said there was consensus to lower output. This would have a positive impact on the market, he added.
Oil fell below $60 a barrel on Friday as investors doubted OPEC's resolve to cut, in the absence of an official statement from the organization that pumps over a third of the world's oil. U.S. crude settled at $59.76, off nearly $20 from a mid-July peak of $78.40.
The OPEC president, along with Iran, said the 11-member group would make the cuts from an official 28 million bpd ceiling -- a move that could lead to tricky negotiations over a realignment of OPEC quotas.
The Organization of the Petroleum Exporting Countries is due for a scheduled meeting on December 14, but some members want to hold an emergency session this month to formalize the cut.
"What is important is that the market finds the OPEC position credible. That is why it is necessary to have a meeting to make a decision on the cut and to act on it," Khelil said.
He said OPEC members were still discussing the possibility of an October 18-19 gathering, an idea he said was supported by Algeria, Saudi Arabia, Libya and Venezuela.
Daukoru said he was not in favor of an emergency meeting. He said OPEC countries could implement cuts next time they set their monthly sales volumes to their customers.
Nigeria and Venezuela announced unilateral reductions just over a week ago.
SAUDI ARABIA CENTRAL
A senior OPEC delegate said on Thursday that leading oil exporter Saudi Arabia would shoulder the biggest part of the burden as OPEC moves to address a 23 percent drop in prices since July 14 and brimming fuel stocks around the world.
The delegate said nine states would take part in the curbs and cut their "fair share" from overall output. OPEC pumped 29.47 million bpd in September, according to a Reuters survey.
Khelil said Algeria would reduce production, but did not say by how much. Iran said it would support an OPEC cut but that the group was still discussing the size of any reduction.
"The cut will be from the current production ceiling of 28 million barrels per day because otherwise it will have no impact on the market," the official IRNA news agency quoted Iranian Oil Minister Kazem Vaziri-Hamaneh as saying.
The United Arab Emirates -- OPEC's third largest producer -- and Qatar have yet to make a public comment. Iraq is not bound by OPEC quotas and Indonesia is a net importer.
OPEC last changed its ceiling in July 2005 with a 500,000 bpd increase in response to rising demand from China and the United States and a seemingly relentless rise in oil prices.
OPEC's plan to cut supply has disappointed the United States despite the high stocks cushion. White House economic adviser Al Hubbard said President George W. bush was not happy with oil prices near $59 a barrel.
Six OPEC States Agree to Cut 1 Million Barrels a Day
http://www.bloomberg.com/apps/news?pid=20601087&sid=ae00RvuvSTso&refer=home
Saudi Arabia and five other OPEC members cut oil output by a total of 1 million barrels a day in an effort to revive prices that lost a quarter of their value in two months, a spokesman for the group said.
What happened? Didn't they get the call from Rove? They are supposed to be cutting prices (increasing production) for the election.
Hey OPEC Minsters, check your voicemail!
so much for our low gas prices huh? Now we know more than ever it's all about keeping the arabs pockets lined with paper and not about keeping prices lower to boast another nation's economy.
Isn't that called price-fixing? as in illiegal?
Foreign nations are not subject to US laws.
I don't think this one will work for much more than an immediate term price increase. A production cut may have the opposite effect and may actually be the act that, in the following weeks, pops the oil speculation bubble.
The scarcity premium built into the oil price may well evaporate if OPEC cuts production. We've been hearing for more than two years now that oil production cannot keep up with demand and it has given the markets an excuse to run the price of oil and gas through the roof. An OPEC production cut, however, sends a clear signal to the world oil market: there IS indeed spare oil production capacity. If there's enough spare capacity that OPEC can meet demand even with a large production cut, then there's probably no reason to attach a premium to oil's price due to its supposed scarcity.
Far more importantly, every single bbl that OPEC actually do cut from production goes straight into the excess cap figure...and that's what's been driving the mkt for almost 3 years.
Add 1 million bbls to excap in one swoop, and 3 weeks later, if that, you're looking at $5-8/bbl lower. And I won't even mention that cutting production or quotas will lead to increased ''cheating'' (hi, there, Algeria et al....)
They have to reduce oversupply eventually anyway or pump oil out onto the sand.
I've noticed that as well. Really irks me when the arabs say they're all about stablizing the worlds economy by keeping try to keep oil prices down. Yeah right!
I was poo poo'd on another thread a little while ago for even suggesting this. OPEC as well as the rest of the world now realizes they can charge whatever they like and they'll get it. World economy be damned.
confirms my worst fears. They want to gouge us for everything they can get.
Yes, and we need to get to drilling in the Gulf and ANWR and tell them where to stick it.
This never pans out. They all make backroom deals and sell under the table, and the supply doesn't change.
Not true, although some small cheating usually occurs, every time OPEC has lowered the quota, the OPEC output nearly matches the cuts. Saudi Arabia usually makes a large portion of the cut and holds the level.
OPEC Annual Statistical Bulletin 2005
http://www.opec.org/library/Annual%20Statistical%20Bulletin/pdf/ASB2005.pdf
See OPEC crude oil production ceiling allocations, pages 6 & 7
What changed since 1998~99? History shows your claim is wrong.
I said that on another thread. Build a few more refineries and then suck ANWAR and the Gulf dry. Then tell OPEC to kiss our collective a$$es.
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