VIENNA, Austria (AP) — Members of the OPEC oil cartel have agreed to make a pre-emptive cut in their production target for crude in an effort to bolster prices in advance of an expected decrease in demand early next year.
The Organization of the Petroleum Exporting Countries decided yesterday to lower its output ceiling by 900,000 barrels a day to 24.5 million barrels starting in November.
The 3.5 percent cut startled the market, where oil futures jumped more than $1 a barrel.
One analyst said he expected the action would keep gasoline and heating-oil prices that consumers pay near current levels. OPEC pumps about a third of the world’s crude.
The surprise decision came after a meeting that also saw Iraq’s return to OPEC for the first time since the ouster of President Saddam Hussein and despite earlier objections from Venezuela.
Although the market is currently “well-supplied,” OPEC is taking preventative action now to try to keep prices stable before an expected dip in seasonal demand in the first quarter of 2004, the group’s spokesman, Omar Ibrahim, told a news conference at OPEC’s Vienna headquarters.
At current output levels, OPEC predicts that the daily supply of crude will outstrip demand by 2.5 million barrels by April. Iranian Oil Minister Bijan Namdar Zanganeh, speaking earlier, called the cut a potential “first step” and did not rule out an additional reduction later in the year.
“It is better that we start before we witness a very bad situation in the market,” he told reporters before the group’s oil ministers met in private to approve the cut.
OPEC wants independent, non-OPEC producers such as Russia to take “concrete measures” to restrain their own output, Mr. Ibrahim said, although the cartel is not making its cut conditional on their cooperation as it did in December 2001.
OPEC had been widely expected to keep its daily production ceiling at 25.4 million barrels. However, a recent slide in prices and OPEC’s expectations of a surge in oil inventories among major importing countries have compounded its fears about a further softening of the market.
Iraq’s gradual return to the market was also a factor. Mr. Zanganeh noted that a cut of 900,000 barrels would return OPEC’s output target to what it was until April, when the war in Iraq removed that country temporarily from the market.
Iraq, a founding member of OPEC, participated in its policy discussions for the first time since the toppling of Saddam.
Iraq’s newly installed oil minister, Ibrahim Bahr al-Uloum, took his place between counterparts from Kuwait and Iran at the U-shaped table in the OPEC Secretariat.
Iraq was not seeking a production quota of its own. It now produces about 1.8 million barrels of oil a day — 700,000 barrels fewer than on the eve of the war in that country. It exports about 900,000 barrels a day, the Iraqi oil minister told a news conference earlier.