Thursday, November 15, 2001

VIENNA, Austria (AP) OPEC has agreed to reduce its daily production target for oil by 1.5 million barrels, or 6 percent, but only if non-OPEC producers share the burden by making a deep cut of their own, the cartel announced yesterday.
Delegates of the Organization of the Petroleum Exporting Countries said they were asking oil-producing countries outside the cartel to decrease output by 500,000 barrels, for a combined cut of 2 million barrels a day aimed at halting the recent slide in oil prices. The cuts are to take effect Jan. 1.
“I want to emphasize something. We are not putting pressure on others. We are calling for contributions,” OPEC Secretary-General Ali Rodriguez told a news conference after the group ended its formal talks.
Confronted with a sharp drop in global demand for crude, OPEC members are eager to tighten their taps and have called on major non-OPEC producers, such as Mexico and Norway, to do the same. Despite pleas and veiled threats of a price war, however, Russia is the only major non-OPEC producer so far to publicly declare its willingness to make even modest cuts.
“The situation has deteriorated beyond the control of OPEC. It is not an issue of whether ‘we want’ or ‘we don’t want.’ The issue is whether ‘we can’ or ‘we cannot,’” Kuwaiti Oil Minister Adel Sabeeh said at OPEC’s headquarters in Vienna.
Mr. Sabeeh stressed that OPEC would not trim production on its own. “Without a substantial contribution from non-OPEC [countries], OPEC cannot maintain the prices,” he told reporters.
“Everybody would be the loser,” said Qatar’s oil minister, Abdullah Bin Hamad Attiyah. “If it is just OPEC, then in my opinion, it would be a disaster.”
OPEC President Chakib Khelil insisted that the group would not follow through with its planned cuts unless non-OPEC producers shouldered some of the responsibility.
“I don’t think this is beyond the capacity of non-OPEC [countries] to do,” Mr. Khelil told a news conference after the delegates ended their formal talks.
He noted that OPEC has already curtailed its output by 3.5 million barrels a day this year without a meaningful contribution from other producers.
OPEC members tried to put a brave face on their uncertain agreement.
“We’ll have a cut of 2 million [barrels] on the first of January, I don’t have any doubt,” Mr. Khelil said.
Mr. Rodriguez, pressed by reporters to say what OPEC would do if nonmembers failed to cut 500,000 barrels a day, replied: “We’ll cross the river if we arrive at the river.”
So far, the group has garnered pledges of non-OPEC cuts totaling about 175,000 barrels a day, said Libyan Oil Minister Abdulhafid Mahmoud Zlitni. Russia, the world’s third-largest oil producer, has offered to make a token cut of 30,000 barrels a day. Mr. Zlitni refused to name the other countries that have committed to cut output.
OPEC, which pumps about a third of the world’s oil, is alarmed by the collapse in demand for crude and the economic uncertainty lingering from the September 11 terrorist attacks on the United States. Oil prices have tumbled by 25 percent since September 11.
OPEC continues to try to peg the price for its benchmark blend of seven crudes within a range of $22 to $28 per barrel. The price of the OPEC benchmark was 12 cents higher at $19.23 a barrel Tuesday, the most recent day for which the data were compiled.
Leo Drollas, chief economist for the Center for Global Energy Studies in London, forecast that OPEC’s benchmark price would fall to $18.10 during the first quarter of next year even with cuts of 2 million barrels a day.
President Bush gave a modest boost to prices Tuesday when he ordered the U.S. government to put more oil into America’s emergency stockpile and for the first time fill the reserve to full capacity.
The U.S. Strategic Petroleum Reserve, which currently has 544 million barrels of oil, is to be filled “in a deliberate and cost-effective manner” up to its full capacity of 700 million barrels, Mr. Bush said in a statement. The first deliveries were to begin in April.
President Clinton tapped the reserve several times last year when crude oil and gasoline prices were high.
Qatar’s Mr. Attiyah said Tuesday he was concerned that non-OPEC nations might try to grab a bigger share of the world market by increasing their production. That could trigger rounds of competitive discounts “a disaster for everybody,” he said.
However, some industry analysts said major non-OPEC producers are unwilling to cooperate unless they see OPEC members making a serious effort to keep from busting their own quotas. OPEC currently pumps about 800,000 barrels above its daily target of 23.2 million barrels.
December contracts for North Sea Brent crude fell $2.06 yesterday to close at $18.75 a barrel in trading on the International Petroleum Exchange in London.
Light, sweet crude for December delivery was $1.93 lower, to close at $19.74 in trading on the New York Mercantile Exchange.

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