By Bruce Stanley
Associated Press
CAIRO, Egypt – OPEC members on Friday were putting the final touches on the their long-delayed plan to slash 1.5 million barrels a day from the cartel’s crude production, in an effort to firm up sagging oil prices and protect their main source of export earnings.
Oil ministers from the Organization of Petroleum Exporting Countries met formally in an emergency meeting to approve the 6 percent decrease in the group’s official output. The cuts will take effect Jan. 1 and last for at least six months, several ministers told reporters before beginning their private talks.
OPEC apparently decided to proceed with the cuts even though rival, independent producers such as Russia and Norway have pledged to make reciprocal cuts that are somewhat smaller than what OPEC requested. OPEC, which has already cut 3.5 million barrels a day this year, is weary of reducing output only to see producers outside the group increase their market share as a result.
The issue came to a head this autumn as the weakening world economy, together with the uncertainty caused by the Sept. 11 attacks on the United States, dragged down prices some 30 percent.
Oil markets gave mixed signals as OPEC appeared ready to make good on its the production cut it agreed to last month.
The price of Brent crude contracts for February delivery rose 29 cents to dlrs 20.63 a barrel, after jumping dlrs 1 to dlrs 20.34 on the International Petroleum Exchange in London. February contracts of light, sweet crude fell 37 cents Thursday to dlrs 20.90 on the New York Mercantile Exchange.
OPEC’s benchmark crude price averaged dlrs 18.68 a barrel Thursday, the most recent day for which information was compiled.
Rilwanu Lukman, Nigeria’s presidential advisor on petroleum and energy, said the anticipated cut would be “more than enough” to lift OPEC’s benchmark price to dlrs 22 a barrel – the group’s minimum target price.
However, some member countries were already questioning whether the combined reduction in OPEC and non-OPEC supplies would be sufficient to restore OPEC’s benchmark to its desired range of dlrs 22-28 a barrel.
“We hope that prices will stabilize within reasonable limits, meaning between dlrs 20 and dlrs 25 (a barrel). This is what is expected now,” Saudi Arabian Oil Minister Al Naimi told reporters.
“But nothing guarantees the stability of a certain price because the price, at the end of the day, is determined by market mechanisms,” he said.
Qatari Oil Minister Abdullah bin Hamad al-Attiyah said Thursday that the group’s previous target price of dlrs 25 a barrel was no longer realistic, given weaker global demand.
“We have to be pragmatic,” he told The Associated Press.
A benchmark price of dlrs 20-22 a barrel would be reasonable and fair “for the time being,” he said. “We need to be flexible, and we want to help the consumer too.”
At the same time, Venezuelan President Hugo Chavez predicted that oil prices wouldn’t regain their recent highs despite the planned cuts in production.
“We hope oil prices will recover but, in any case, the recovery won’t get to the level we’ve enjoyed over the past two years,” Chavez said Thursday during a speech to soldiers in Venezuela.
Although OPEC agreed in November to reduce production, it made its decision conditional on a reciprocal decrease of 500,000 barrels a day in output from major oil producers outside the group.
“If we are going to take action to help prices recover, then it’s in their own interest to come along with us,” Lukman said.
Non-OPEC producers have so far promised to cut by a total of 462,500 barrels a day – 37,500 barrels shy of what OPEC has asked for. Still, all indications from OPEC were that the group wouldn’t let this discrepancy hold it back from putting its own cuts into effect.
Among the cuts from non-OPEC members, Norway and Russia have each pledged to decrease daily supplies by 150,000 barrels, while Mexico has promised to reduce by 100,000 barrels, Oman by 40,000 barrels and Angola by 22,500 barrels.
OPEC’s current daily target is 23.2 million barrels, and it pumps about a third of the world’s oil.
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