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.