Opec to cut production by 500 000 bpd in Feb

ABUJA – Opec has agreed an oil output cut of 500 000 barrels per day, or two per cent, delayed until February1 when the northern winter is ending, a delegate said yesterday, sending oil prices more than a dollar higher.

By postponing a further reduction until peak demand has passed, Opec is responding to importer nations’ concern that a cut now will drive prices higher and hurt their economies. The group that pumps over a third of the world’s oil has already curbed output this year – by 1,2 million bpd to 26,3 million in October to halt a 10-week, 25 per cent price slump.As recently as last week there was little doubt a further cut of at least 500 000 barrels per day would follow from January 1.But with oil above US$60 and consumer nations on edge the mood shifted in some delegations towards a delay.US oil was up US$1,00 at US$62,37 at 1204 GMT, having hit a session high of US$62,72 on the news.Before yesterday’s meeting Opec ministers were in agreement the market is oversupplied – stocks in top consumer the United States are the highest since 1998 for the time of year – but they wanted to get their timing right.Cut too soon and prices could spike.Delay, and prices could fall sharply in the second quarter as demand slackens.Consumer stocks are high, but they are in decline.Inventories in the OECD group of industrialised countries fell 40 million barrels in October, the International Energy Agency said on Wednesday, and the trend continued in November.Saudi Oil Minister Ali Al-Naimi said the market is in better shape now than when ministers last met.He estimated Opec had succeeded in removing half the excess 100 000 million barrels.”The fundamentals of the market are much better than they were in October,” he said.Speaking ahead of yesterday’s meeting he added he hoped the market would move into better balance after Opec’s decision.The move to delay the output cut should go some way to addressing the concerns of import-dependent countries.US Energy Secretary Sam Bodman and International Energy Agency head Claude Mandil had both called on Opec to wait before making further supply reductions.The IEA, adviser to 26 industrialised countries, said in its monthly report on Wednesday Opec cuts from Nov.1 were making themselves felt, “cold comfort for a risk-prone global economy already facing another winter with high oil prices”.Oil has fallen from a mid-July peak of US$78,40 but is still three times the price at the start of 2002 as Asian demand kicked in.Refining constraints and worries over supply from Iraq, Nigeria, Iran and Russia helped fuel the rally.Nampa-ReutersThe group that pumps over a third of the world’s oil has already curbed output this year – by 1,2 million bpd to 26,3 million in October to halt a 10-week, 25 per cent price slump.As recently as last week there was little doubt a further cut of at least 500 000 barrels per day would follow from January 1.But with oil above US$60 and consumer nations on edge the mood shifted in some delegations towards a delay.US oil was up US$1,00 at US$62,37 at 1204 GMT, having hit a session high of US$62,72 on the news.Before yesterday’s meeting Opec ministers were in agreement the market is oversupplied – stocks in top consumer the United States are the highest since 1998 for the time of year – but they wanted to get their timing right.Cut too soon and prices could spike.Delay, and prices could fall sharply in the second quarter as demand slackens.Consumer stocks are high, but they are in decline.Inventories in the OECD group of industrialised countries fell 40 million barrels in October, the International Energy Agency said on Wednesday, and the trend continued in November.Saudi Oil Minister Ali Al-Naimi said the market is in better shape now than when ministers last met.He estimated Opec had succeeded in removing half the excess 100 000 million barrels.”The fundamentals of the market are much better than they were in October,” he said.Speaking ahead of yesterday’s meeting he added he hoped the market would move into better balance after Opec’s decision.The move to delay the output cut should go some way to addressing the concerns of import-dependent countries.US Energy Secretary Sam Bodman and International Energy Agency head Claude Mandil had both called on Opec to wait before making further supply reductions.The IEA, adviser to 26 industrialised countries, said in its monthly report on Wednesday Opec cuts from Nov.1 were making themselves felt, “cold comfort for a risk-prone global economy already facing another winter with high oil prices”.Oil has fallen from a mid-July peak of US$78,40 but is still three times the price at the start of 2002 as Asian demand kicked in.Refining constraints and worries over supply from Iraq, Nigeria, Iran and Russia helped fuel the rally.Nampa-Reuters