- The Washington Times - Thursday, December 6, 2001

LONDON (AP) OPEC was expected to trigger a 6 percent cut in its official crude-oil output after Russia, relenting to intense pressure, agreed to reduce its production by 150,000 barrels a day to help prop up sagging oil prices.
Russia's decision yesterday ended a showdown with the Organization of the Petroleum Exporting Countries that threatened to unleash a potentially devastating price war for crude. One energy analyst forecast that the overall decrease in oil output would nudge gasoline prices higher, but said he expected the rise would be modest.
"It's a very positive move in the right direction," said Kuwaiti Oil Minister Adel Sabeeh.
Oil futures surged almost $1 higher on the news, then fell back as skepticism grew about Russia's resolve to honor its commitment.
OPEC was preparing to issue a communique today announcing it would proceed with cuts of 1.5 million barrels a day in its own production, said a cartel official, speaking on the condition of anonymity from the group's headquarters in Vienna, Austria. The group's secretary-general, Ali Rodriguez, was conferring with OPEC oil ministers to agree on the document's wording, the official said.
After the decision in Russia, attention shifted to Norway, the world's third-largest exporter of oil behind Saudi Arabia and Russia. OPEC has asked Norway for similar cuts.
A firm commitment from Norway, a non-OPEC country, together with the pledge from Russia, would come very close to satisfying OPEC's demand that oil-producing countries outside the group cooperate with its plan to reduce its own production by 1.5 million barrels a day, or 6 percent. OPEC supplies about a third of the world's oil.
"I think it makes triggering the OPEC cuts a near certainty," said George Beranek of the Petroleum Finance Co., a Washington consultancy.
"That's going to mean, over time, higher crude prices, which will be reflected in higher refined-product prices," he said.
However, energy analysts noted that U.S. inventories of gasoline and other refined products are plentiful. "I really don't think we have to worry about a return to last spring's very high gasoline prices," Mr. Beranek said.
In an unusual act of diplomatic brinksmanship, OPEC insisted last month that non-OPEC producers promise to trim their output by a total of 500,000 barrels a day before it would put its own cuts into effect Jan. 1. Russia's turnaround appeared to vindicate OPEC's tough stance.
Russia had said for weeks it would cut output by just 50,000 barrels a day. By agreeing yesterday to triple the size of that cut, Russian oil companies appeared to acknowledge that OPEC members were probably better equipped than they were to weather a collapse in prices caused by a potential glut in crude supplies.
Russia's about-face lifted contracts of Brent crude for January delivery 96 cents higher to $20.25 a barrel in early trading on the International Petroleum Exchange in London. Brent futures settled back later in the afternoon to $19.55, up 26 cents.
OPEC has a daily production target of 23.2 million barrels and aims to maintain a benchmark price between $22 and $28 per barrel. The cartel has already curtailed its official output this year by 3.5 million barrels a day without a meaningful contribution from non-OPEC producers.

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