- The Washington Times - Thursday, December 9, 2004

CAIRO (AP) — OPEC will cut back on oil production early next year in a bid to stave off a further decline in the world price, Kuwait’s oil minister said yesterday.

The comments by Sheik Ahmad Fahad Al-Ahmad Al Sabah revealed what delegates to the Organization of Petroleum Exporting Countries had agreed in informal discussions ahead of their formal meeting today.

Asked when the cut in production would start, Mr. Al Sabah said: “Everyone has committed for next month, maybe to start from February.”

He said all members of the 11-nation organization were committed to complying fully with the current production ceiling of 27 million barrels a day and taking excess oil off the market.

Mr. Al Sabah estimated OPEC is producing about 1.7 million barrels a day above production quotas, though others estimate it at 1.1 million.

Mr. Al Sabah spoke after a meeting of representatives of Kuwait, Saudi Arabia, the United Arab Emirates and Qatar.

The full OPEC meeting today is expected to set production policy for the coming months.

Earlier yesterday, oil ministers held out the possibility that if crude prices continue to fall, OPEC could reconsider its production target early next year and lower it. Some OPEC members had wanted a commitment to lower quotas immediately, but Ali Naimi, oil minister of powerhouse Saudi Arabia, suggested those trial balloons had burst.

“It is too early to jump on that basis,” Mr. Naimi told reporters.

OPEC’s production total reaches more than 30 million barrels a day once Iraq is included. Iraq, which produces about 2 million barrels a day, has been exempted from quotas to enable it to rebuild its economy.

Benchmark U.S. crude futures have fallen by almost a quarter since the record prices of more than $55 a barrel in late October. The decline has been sharpest in the last week or so, spurred by increases in U.S. petroleum inventories, mild winter weather, and little sign of a slowdown in OPEC output.

“I think the price decline was expected, but the speed of the decline was a surprise,” the oil minister of the United Arab Emirates, Mohammed bin Dhaen al-Hamili, told reporters.

He said the first step should be to tackle the production that exceeds the quota target.

Earlier, Kuwait’s Mr. Al Sabah had said he was in favor of enforcing compliance with quotas before reducing the target.

“I think, we can cut all overproduction [now], and then think about [reducing] 500,000 barrels a day from the official ceiling,” Mr. Al Sabah said earlier yesterday.

OPEC is scheduled to meet in Iran next March.

There was no immediate word on whether OPEC also is preparing to raise its price band for crude today in another move to prevent a further slide in prices. Crude is now valued at nearly double the bottom end of the present band of $22 to $28; several ministers said they wanted that span raised significantly.

The Emirates’ Mr. Al-Hamili said the new range should be between $33 to $38 because of the weak dollar and the realities of more expensive crude.

Officials from Iran and Venezuela — OPEC’s No. 2 and No. 3 producers — have also said they would like to see the low end of OPEC’s preferred price range at $30 a barrel.

Libya’s Oil Minister Fathi bin Shatwan said colleagues endorse the need to defend the group’s reference price at $35 a barrel.

Sentiment within OPEC to cut production has grown over past weeks as the price of crude beat a retreat.

Recovering from recent lows, light, sweet crude for January delivery settled 59 cents higher at $42.53 per barrel on the New York Mercantile Exchange. January Brent was up 98 cents to $39.67 per barrel on the International Petroleum Exchange.

The rise appeared to anticipate an expected OPEC decision to call a halt to exceeding quotas.

If the meeting formally endorses the strict heeding, “that will probably maintain prices where they are, or they could go a little higher,” said analyst Diane Munro of Wood Mackenzie.

The recent fall in prices reflects replenished stocks, slowing economies, high production by both OPEC and non-OPEC countries, a relatively mild Northern Hemisphere winter, and less of the speculative futures buying that led oil to settle at $55.17 twice in October.

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