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OPEC confirms plan to cut output

Posted: Thursday, November 15, 2001

VIENNA, Austria -- 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 Wednesday.

Delegates of the Organization of 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 halting the recent slide in oil prices. The cuts are to take effect Jan. 1.

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 oblige.

''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 al-Sabeeh said at OPEC's headquarters in Vienna.

Al-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 said.

''Everybody would be the loser,'' said Qatar's oil minister, Abdullah Bin Hamad Al Attiyah. ''If it is just OPEC, then in my opinion it would be a disaster.''

OPEC president Chakib Khelil insisted 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,'' Khelil told reporters after the delegates ended their formal talks.

He noted that OPEC has 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 1st of January, I don't have any doubt,'' Khelil said.

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.

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 Sept. 11 terrorist attacks on the United States. Oil prices have tumbled by 25 percent since Sept. 11.

OPEC continues to try to peg the price for its benchmark blend of seven crudes within a range of $22-$28 per barrel.

The price of the OPEC benchmark was 12 cents higher at $19.23 a barrel on Tuesday, the most recent day for which the data was 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 now 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, Bush said. The first deliveries were to begin in April.

Qatar's Al 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 $1.78 Wednesday to $19.03 in trading on the International Petroleum Exchange in London.

Light, sweet crude for December delivery was $1.77 lower at $19.90 in trading on the New York Mercantile Exchange.



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