Members of the Organization of Petroleum Exporting Countries last week agreed to cut their oil production by 1 million b/d effective Sept. 1 to reinforce the sagging oil market.
The widely-anticipated action-the third OPEC production cut this year-was taken without a formal meeting. OPEC said, however, it still has the option to meet soon if the market continues to slide. OPEC's next regular meeting is scheduled for Sept. 26 in Vienna.
OPEC cuts
The group said, "Considering the impact of the slowing world economy on oil demand, and the relatively strong build-up of oil stocks, OPEC's objectives are to ensure market stability, satisfy world demand, and avoid oil price volatility, in the interest of both producers and consumers."
It expressed hope that non-OPEC producers also will reduce oil output because their interests are "best served through market stability."
Under the plan, Algeria would lower output by 32,000 b/d to 741,000 b/d, Indonesia 52,000 b/d to 1,203,000 b/d, Iran 146,000 b/d to 3,406,000 b/d, Kuwait 80,000 b/d to 1,861,000 b/d, and Libya 54,000 b/d to 1,242,000 b/d.
Also, Nigeria would reduce production by 82,000 b/d to 1,911,000 b/d, Qatar 26,000 b/d to 601,000 b/d, Saudi Arabia 324,000 b/d to 7,541,000 b/d, The UAE 88,000 b/d to 2,025,000 b/d, and Venezuela 116,000 b/d to 2,670,000 b/d.
OPEC discussions
Earlier, two oil ministers said OPEC representatives had been discussing, by telephone and by fax, a potential cut.
Alvaro Silva Calderon, Venezuela's Minister of Energy and Mines, and Obaid Bin Saif Al-Nasseri, UAE Minister of Petroleum and Mineral Resources, said OPEC members were considering action without the delay of a face-to-face meeting.
Silva Calderon said there is an oversupply of 2 million b/d on world oil markets, and a reduction of 1-1.5 million b/d would help keep prices within the group's targeted price band of $22-28/bbl.
Al-Nasseri said, "A production cut in the range of 1 million b/d would be suitable for the time being."
He said, "OPEC's trend to reduce output, although prices are not declining to the minimum range of the OPEC-assigned price, comes within the organization's initiative to stop prices from collapsing lower than the designed limit and to defend the targeted price of $25/bbl."
Another production cut-the third by OPEC this year-should trigger a recovery in world oil prices to an average $25/bbl, said Silva Calderon.
He said the recent drop in prices was caused by speculators in the market, world economic recession that dampened demand, and resumption of Iraq's crude exports under the UN's oil-for-aid program.
"We should continue observing the market and see how it reacts in the coming days," said Silva Calderon. "The Venezuelan basket [price] is currently averaging about $21/bbl, and that is within the estimates of our national budget."
Non-OPEC call
Silva Calderon and Al-Nasseri both called for cooperation by non-OPEC producers to help dry up the excess supply of oil.
Silva Calderon said representatives from Russia, Angola, Mexico, and Oman should attend any emergency meeting called by OPEC "because among all of us, we have to agree on the volumes that we should place on the market to rationalize supply."
However, officials in Norway recently indicated that they have no plans to reduce that country's oil production.
