OPEC consensus for oil output cut

OPEC consensus for oil output cut

Reuters, Cairo

OPEC oil producers are set to seal an unprecedented alliance on output restrictions with rival independent suppliers to prop up world crude prices, cartel ministers said on Thursday.

Saudi Oil Minister Ali al-Naimi said OPEC ministers had a consensus to reduce supply by 1.5 million barrels a day (bpd) from Jan. 1 at their meeting on Friday.

"We have a consensus for 1.5 from Jan. 1," he told reporters in Cairo.

OPEC said in November it was prepared to implement the restrictions to counter an economic downturn that is sapping world petroleum demand -- but only if non-OPEC producers made reductions of 500,000 barrels daily.

Big independent producers like Russia and Norway stood accused by the cartel of taking a free ride on three rounds of supply cuts made already this year by OPEC.

OPEC, in control of nearly two-thirds of world exports, had sliced 3.5 million barrels a day since January 2001 and was worried it was losing market share to non-aligned suppliers.

Naimi said there was no doubt now that the five non-OPEC nations that also include Mexico, Oman and Angola would deliver on promises made in recent weeks to remove a combined 462,500 bpd.

"It is certain that they will carry out their pledges and that OPEC will comply with the cuts," the Saudi minister told Reuters on Wednesday. The reductions are likely to be imposed for six months although OPEC will review policy at a mid-March meeting.

Naimi said OPEC was aiming to push prices back up to US$20-$25 for a barrel of its crude -- equivalent to about $22-$27 for international benchmark Brent blend. Brent in early London trade on Friday rose $1.21 a barrel to $20.55.

OPEC's success in getting non-OPEC to help shoulder the burden of its supply management campaign puts to rest the threat of an all-out price war that in mid-November pushed Brent below $17 a barrel.

Oil had fallen from $28 for Brent since the Sept. 11 attacks darkened an already gloomy economic outlook, hitting petroleum demand.

Now it looks likely that importing nations, struggling to combat recession, will see energy bills rising again.

"These are the largest ever non-OPEC contributions to OPEC's efforts to maintain the price of oil," said consultant Gary Ross of New York's PIRA Energy.

"Producers that control eighty percent of the world's crude exports are now working together for higher prices."