By the OGJ Online Staff
LONDON, Nov. 22 --Prices on the London International Petroleum Exchange (IPE) have staged a recovery, as indications emerged that the Organization of Petroleum Exporting Countries (OPEC) expects to announce an agreement with non-member producers, which could take as much as 2 million b/d out of the marketplace.
With US markets closed trading was brisk on the IPE, with Brent crude for mid-December delivery moving up to $19.95, with some traders suggesting that it could breach the psychologically important $20 barrier by the end of the week. On Monday Brent prices had dropped to $16.65.
An apparent agreement with Russia and Norway on output cuts has led to the official OPEC basket oil price moving back above $17. The price, used by the grouping to set its production policy, now stands at $17.06, after falling to a low-point of $15.85 on Monday, according to OPEC secretariat calculations.
The price rally on the IPE came after it was announced by Venezuelan President Hugo Chavez that an agreement between OPEC countries and independent oil producers aimed at reducing daily oil output "is imminent."
Speaking at a meeting with businessmen, Chavez indicated that Ali Rodriguez, the Venezuelan Secretary General of the Organization of Petroleum Exporting Countries, had informed him by telephone that an accord "to reduce production by two million barrels a day was almost imminent."
"In this manner, oil will find its right price, said the Venezuelan leader, stressing that Norway, Russia and Mexico had agreed to cooperate with OPEC in reducing production and propping up the price of crude.
Initial confusion in the market place over Norway's commitment was dispelled later in the day when Norway officially announced that it will reduce the oil production by 100 000 � 200 000 b/d if OPEC and other major oil producers reduce production.
The decision was made, said a government statement, due to the significant decline in crude oil prices, and the possibility for further decline unless supply is reduced.
Minister of Petroleum and Energy, Einar Steensn�said, "The experience from 1998-99, when oil prices fell as low as $10, taught us that it is difficult and takes time to stabilize the oil market. Thus, we find it necessary to act in advance to avoid further deterioration of oil prices.
"There has been a growing imbalance between supply and demand in the oil market in recent months. The slowdown of the world economy has had a negative impact upon the demand for oil. At the same time there has been a gradual increase in global oil production capacity. Inventories will rise unless supply is reduced. Increasing inventories will cause oil prices to fall further. Norway aims at stable oil prices at a level that is acceptable for oil exporting as well as oil importing countries.
"Our aim is to avoid prices that will harm the economies of oil exporting countries, but also to avoid prices that can be harmful to the world economy."
