JP/14/Oil

JP/14/Oil

OPEC agrees to cut surplus output to defend high prices

Amelie Herenstein
Agence France-Presse/Cairo

OPEC oil producers agreed on Friday to reduce crude supplies by
one million barrels a day from the beginning of next year in a
bid to curb a sharp slide in oil prices from record high levels.

The 11-member cartel left its official output quota of 27
million barrels a day unchanged, but agreed to scale back surplus
production.

Members of OPEC, which supplies about 40 percent of the
world's oil, have been pumping for months at close to full
capacity to try to bring down prices from record high levels
which topped US$55 a barrel in October.

The Organization of Petroleum Exporting Countries (OPECC) said
in a statement that the decision to rein in supplies was taken
"to prevent oil prices continuing to deteriorate to an
undesirably low level".

"The downward trend seemed to us to be a bit too rapid, and it
appeared that if we did not take this sort of decision the prices
would not stabilize and we would find ourselves in a situation
where we couldn't control the stability of the market," said
Algeria's Energy Minister Chakib Khalil.

OPEC ministers will meet again at their Vienna headquarters on
Jan. 30 to review the situation.

Oil prices rose slightly as OPEC moved to tighten the taps.
New York's main oil contract, light sweet crude for delivery in
January, was 15 U.S.cents higher at $42.68 a barrel in late
morning trading.

Although OPEC is relieved to see prices cool from the record
highs, which triggered widespread concern from consumer nations,
they are nervous about the risk of a slump in markets when spring
arrives in the northern hemisphere.

Saudi Arabian Oil Minister Ali al-Nuaimi said the cartel acted
to try to prevent global petroleum inventories recovering too
quickly.

"We took the decision to avoid an extraordinary build up of
the inventories," he said.

Quota-busting is common for OPEC producers. But Jamal Qureshi,
an analyst at Washington-based consultancy PFC Energy, said he
expected the cartel to strive to enforce the announced output
reductions.

"I think they'll implement at least most of it, and it will be
the Gulf producers that bear the brunt," he told AFP on the
sidelines of the meeting.

Qatari Energy Minister Abdullah bin Hamad al-Attiyah said the
Jan. 30 meeting would discuss output levels for the second
quarter of 2005.

Asked if he expected OPEC producers to comply with the cut he
said: "Yes I think so, because it's very important to comply".

"Statistics show that if they do not comply it will be
negative," the minister said, adding that he was "still worried"
about the supply situation in the second quarter.

"If there is a need to cut in January then we will do it."

Iranian Oil Minister Bijan Namdar Zangeneh agreed that a
further cut was possible in the second quarter of 2005.

"If the market's reaction tells us it's necessary we will do
it. It depends on the market reaction, the price," he said.

OPEC's decision to shave output while prices are still above
$40 a barrel risks irking oil-importing nations who are concerned
that high energy prices will slam the brakes on a global economic
recovery.

The pro-consumer International Energy Agency insisted that
while prices may have eased slightly recently, "the market is not
out of the woods yet."

"Producer concern over a precipitous fall is prices is
somewhat overstated," the IEA said in a monthly report on Friday.

OPEC argues that as well as falling prices, a weak dollar, in
which oil is priced on world markets, is also cutting into their
revenues.

But Nuaimi said OPEC would continue to bill its customers in
dollars.

"OPEC is staying with the dollar. The dollar will change.
Today it's down, tomorrow it's up. It's a phenomenon of the
currency market," he said.