Oil prices rise as output cuts come closer to reality

Oil prices on the London International Petroleum Exchange (IPE) have moved above the $20 mark as traders prepared for an output cut of 1.5 million b/d by members of the Organization of Petroleum Exporting Countries to be confirmed in Cairo on Friday. The price of Brent for February delivery rose $1.54 to $20.88/bbl, a rise of 8% and the largest 1-day increase for more than a year.

Dec. 27, 2001

2 min read

By the OGJ Online Staff

LONDON, Dec. 27 -- Oil prices on the London International Petroleum Exchange (IPE) have moved above the $20 mark as traders prepared for an output cut of 1.5 million b/d by members of the Organization of Petroleum Exporting Countries to be confirmed in Cairo on Friday.

The price of Brent for February delivery rose $1.54 to $20.88/bbl, a rise of 8% and the largest 1-day increase for more than a year. The IPE was closed Wednesday.

Yesterday, the February New York Mercantile contract for US benchmark light, sweet crude rose 8.4%, the biggest 1-day rise since Oct. 12, 2000, and the highest closing price, at $21.27, since Nov. 13.

The price rise in London came after the Saudi Arabian oil minister Ali al-Naimi said that OPEC will cut production by 1.5 million b/d at its meeting in Cairo on Friday.

OPEC is aiming to restore prices to its target range of $22-$28/bbl, reversing the 30% fall in prices since September. The output cut has been expected since non-OPEC producers agreed to act with the cartel to cut output. The cut is expected to last 6 months, starting at Jan. 1, and to cut OPEC's quota to 21.7 million b/d.

The Saudi Arabian oil minister said the output quota system would be reviewed at the next scheduled OPEC meeting in March.