Indonesia supports OPEC plan to cut crude oil output

Indonesia supports OPEC plan to cut crude oil output

JAKARTA (JP): The government said on Wednesday that it
supported calls for a production cut of between 1 million to 1.5
million barrels of crude oil per day (bpd) by the Organization of
Petroleum Exporting Countries (OPEC).

Minister for Energy and Mineral Resources Purnomo Yusgiantoro
said that Indonesia would propose the production cut in the
upcoming OPEC meeting in Vienna on Jan. 17.

"Our position is clear, we will urge for a production cut of
between 1 million to 1.5 million bpd," Purnomo told a news
conference following the inauguration of the new directors of
state oil and gas company Pertamina.

Indonesia is one of 11 crude oil exporting countries with OPEC
membership.

On Tuesday, leading OPEC producer Saudi Arabia revealed that
it was preparing to cut production by 1.5 million barrels a day
in a bid to maintain crude oil prices floating at $25 a barrel.

Last weekend's summit meeting of Gulf Arab leaders grouping
under the Gulf Cooperation Council concluded that they must do
everything they can to achieve OPEC's target price of $25.

The six-nation council includes OPEC members Saudi Arabia, the
United Arab Emirates, Kuwait and Qatar.

Purnomo, however, added that Indonesia wanted to first study
the compliance of other OPEC members in meeting their production
quota.

"First, we want to be shown the production data of other OPEC
members. Only then will we decide on how much we must cut
production," he explained.

OPEC members produce crude oil under a production quota to
help keep crude oil prices stable at between $22 to $28 a
barrel.

Should crude oil prices fall outside the range for more than
10 consecutive days, OPEC intervenes and either raises or cuts
the production quotas of its members.

Lowering production by 1.5 million bpd would translate into a
5.5 percent reduction of OPEC members' quotas, excluding Iraq,
whom the United Nations still bars from exporting crude oil.

Since October, crude oil prices have fallen sharply after
reaching record levels in the second and third quarter of last
year.

During that period, OPEC raised output twice to bring oil
prices back below $28 a barrel.

Pertamina president Baihaki Hakim said that most OPEC members
have expressed agreement for a production cut.

"The question is how much the production cut will be ... it
looks like we will settle for a cut of 1 million barrels a day,"
Baihaki said.

According to him, the sudden drop of crude oil prices is part
of the crude oil market cycle.

He said that in the first quarter of every year, crude oil
prices weakened due to an oversupply and a drop in demand.

"In the last three months, people usually build up their
(crude oil) stocks," he said, "while fuel consumption now
declines as the winter season ends."

Baihaki predicted that the slump in oil prices will drag on
until the second quarter of this year.

He warned that if OPEC responded too late prices could plunge
to below $22 a barrel, which is OPEC's lowest price target.

"Results of several consultants' reports which we've studied,
estimate oil prices could fall to between $15 to $14 a barrel,"
Baihaki said.

This year's state budget assumes crude oil prices of $24 a
barrel, a revision in fact from an earlier target of $21, which
was deemed as being too pessimistic.

News Agency Reuters reported on Wednesday a modest gain in oil
prices, buoyed by comments from OPEC kingpin Saudi Arabia that it
is seeking a substantial cut in cartel output.

Fresh oil stockpile data due from the United States at the end
of the day will be watched by traders for signs of whether the
uptrend will stride on or falter.

London Brent blend futures for February delivery by midday
were 40 cents higher at $24.70, adding to Tuesday's 43-cent
gains.

U.S. benchmark NYMEX crude futures for February gained 20
cents to $27.41 a barrel.

Oil prices are looking to extend their bullish streak to a
third consecutive day, snapping a month-long downtrend sparked by
strengthening U.S. oil reserves and the realization that world
oil supply was sufficient to meet demand.(bkm)