MAJOR OIL PRODUCERS AGREED TO CUT PRODUCTION
By Parviz Sahra’i, IPS’ Energy Correspondent
PARIS 29 Dec. (IPS) The Organisation of Petroleum Exporting Countries (OPEC) and five non-OPEC producers announced on Friday they would reduce crude oil output by 2 million barrels per day for six months starting first of January 2002, aimed at lifting the price of oil above $20 a barrel.
The announcement was made in Cairo at the end of a meeting of the oil ministers of the 11-member Organisation, which controls more than one-third of the global oil supply.
Oil prices went up Friday, a barrel of Brent North Sea crude for February delivery rose 44 cents to $20.78. In New York, the light sweet crude February contract gained 20 cents to $21.10 a barrel in early deals.
"The OPEC conference confirmed its decision to implement the previously announced reduction of its overall production level by an additional 1.5 million bpd for six months, effective first of January 2002", said the final statement read by the cartel's deputy secretary general, Adnan Shihabuddin.
OPEC said it made the decision after "having reviewed the recent positive announcements from non-OPEC oil producers namely Angola, Mexico, Norway, Oman and the Russian Federation regarding their pledged reductions totalling 462,500 bpd and the current oil market situation.
The two groups struck a similar deal in 1998 after the price per barrel tumbled under the 10-dollars.
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The latest cut in OPEC's production represents six percent of its total current output of 25.5 million bpd, including the production of Iraq, which is not bound by the organisation's quota system.OPEC's current official ceiling, excluding Iraq, is 23.2 million bpd. The new cut will bring it to 22.7 million bpd.
OPEC had slashed its production unilaterally three times in 2001, withdrawing 5 million bpd from the market since last January, in a bid to maintain the price of a barrel between $22 and 28.
But the September 11 terror attacks in the United States dealt a blow to the already shaky global economy and weakened oil demand further, sending the price per barrel below $20.
Oil prices have fallen to as low as $16 (£11) a barrel from their peak of US$35 per barrel in November last year.
"We have initiated a very important process" with the non-OPEC countries "to obtain their cooperation," said the president of the OPEC conference, Algerian Energy and Mines Minister Chakib Khelil.
"It will have very important repercussions on the price stability in the future," he added, indicating that it is second time that OPEC and non-OPEC countries cooperate on prices.
"OPEC will continue to monitor both the global economic developments and the supply-demand situation in close consultation with other producers in order to insure that the desired results are indeed realised", the communiqué added.
Khelil pointed out that while OPEC was committed to reduce output for the first half of next year, the slash in production of other producers such as Russia was for the first quarter only.
OPEC's secretary general, Ali Rodriguez-Araque, said he would go to Russia in January to co-ordinate the policy of OPEC with independent producers ahead of the Organisation's next meeting at its headquarters in Vienna on March 15 to evaluate the market outlook.
OPEC said it hopes to restore crude oil prices to "fair and equitable levels" by having non-members become "de-facto members" of the cartel "for a few months".
However, experts say some non-Opec countries such as Russia and Angola were unlikely to support cuts for very long, given their investment in increasing capacity.
"Russia has agreed to cut production from the third quarter because its exports normally fall in winter anyway, due to higher domestic demand", an Iranian oil analyst told IPS, adding that Moscow’s "virtual cut" was a "good face saving for both sides".
OPEC ministers, expecting better conjuncture for the world economic outlook in the second semester of the coming year to give new boost for oil prices, refused to speculate on new cuts, saying that it would "depend on markets situation". ENDS OPEC PRODUCTION CUT 291201