OPEC to cut up to 1m bpd

OPEC to cut up to 1m bpd

Peg Mackey, Reuters, Dubai

Momentum is building within OPEC for a supply cut of 700,000
to one million barrels per day (bpd) to boost sagging oil prices,
but the timing for any reduction has not been decided, a Gulf
source said on Tuesday.

"There is a movement (in OPEC) for a cut," the Gulf source
told Reuters, adding that oil ministers were in the midst of
consultations. "Consensus is starting to build for a reduction of
between 700,000 barrels per day (bpd) to one million bpd."

The Organization of the Petroleum Exporting Countries wants
ultimately to restore prices to a US$25 per barrel target for its
basket of seven crude oils.

But fears of recession have deflated oil prices by 25 percent
since the Sept. 11 attacks on the United States, pushing OPEC's
basket price below its $22-$28 range for 11 days running. The
basket fell to $19.75 on Monday.

Key producers Iran and Kuwait have said they temporarily could
tolerate prices at, or slightly below, $22 given the bleak
prognosis for petroleum demand and the world economy.

But OPEC power Saudi Arabia has vowed to move prices towards
the group's $25 objective.

The kingdom's call appears to be gaining support.

OPEC Secretary-General Ali Rodriguez said on Tuesday that the
exporters' group would not allow prices to stray below $22 for
long.

"OPEC will do something if prices stay below $22, because it
is not going to let that situation continue," Rodriguez told
Reuters from OPEC's Vienna secretariat.

He added that the ministers were still discussing a variety of
oil market scenarios and it was too early to say how OPEC might
react to the latest oil price slump.

"The scenario of war has been combined with a world economic
slowdown and there is not a single analyst who can make a firm
forecast with any certainty," Rodriguez said.

"That's why we are studying various scenarios and we have to
be very prudent, we cannot rush into a decision."

While more members are backing the call for a fourth output
reduction this year, the timing of another curb is still a matter
of debate.

"There are some who want to cut now and others who want to
wait until the U.S. retaliation against Afghanistan is over," the
Gulf source said.

The oil cartel chose not to activate its automatic price band
mechanism, which stipulates that OPEC cut output if its reference
price says below $22 for 10 consecutive trading days -- a point
reached on Friday.

The producers are due to meet again on November 14 in Vienna,
but the possibility for an emergency session before then has not
been ruled out.