Opec agrees to cut surplus production

The 11-member group left its total output quota unchanged at 27 million barrels per day but decided to reduce its actual supply to bring it closer in line with the official ceiling.

“Over-production will be reduced by one million barrels a day from January 1, 2005, and we will meet again on January 30 to reexamine the situation,” Algeria’s Energy Minister Chakib Khalil said after the Opec meeting.

He said Opec had taken the decision because of the recent falls in crude prices on world markets in the face of lower-than-expected demand.

“The downward trend seemed to us to be a bit too rapid, and it appeared that if we did not take this sort of decision the prices would not stabilise and we would find ourselves in a situation where we couldn’t control the stability of the market,” said Khalil.

Although Opec is relieved to see prices cool from the record highs, which triggered widespread concern from consumer nations, they are nervous about the risk of a slump in markets when spring arrives in the northern hemisphere.

Saudi Arabian Oil Minister Ali Al Nuaimi said the group acted to try to prevent global petroleum inventories recovering too quickly.

“We took the decision to avoid an extraordinary build up of the inventories,” he said.

Opec has official output quotas totalling 27 million barrels per day but is currently producing at least one million barrels more.

Group members have been pumping for months at close to full capacity to try to bring down prices from record high levels which topped $55 a barrel in October but have since slid back to just over $40.

Qatari Energy Minister Abdullah bin Hamad Al Attiyah said the January 30 meeting would discuss output levels for the second quarter of 2005.

Asked if he expected Opec producers to comply with the cut he said: “Yes I think so, because it’s very important to comply”.

“Statistics show that if they do not comply it will be negative,” the minister said, adding that he was “still worried” about the supply situation in the second quarter.

“If there is a need to cut in January then we will do it.”

Iranian Oil Minister Bijan Namdar Zangeneh agreed that a further cut was possible in the second quarter of 2005.

“If the market’s reaction tells us it’s necessary we will do it. It depends on the market reaction, the price,” he said.

Oil prices rose as Opec moved to tighten the taps.

New York’s main oil contract, light sweet crude for delivery in January, was 55 cents higher at $43.08 a barrel in electronic trading at about 1330GMT.

In London Brent North Sea crude oil gained 48 cents to $40.15 a barrel.