Two leading members of Opec yesterday confirmed that the oil-producing cartel has agreed to cut output, ending a prolonged stand-off with non-Opec countries.
Saudi Arabia's Oil Minister, Ali Ibrahim al-Naimi, said that Opec would announce an output cut of 1.5 million barrels a day when it holds an emergency meeting in Cairo tomorrow. He was joined by Kuwait's Oil Minister, Adel Khalid al-Sabih, who agreed that the cut would be announced at the gathering.
The statements caused the price of crude oil to surge as much as 41 cents to $20.03 a barrel on the New York Metal Exchange.
Arguments between Opec countries and other oil producers, led by Russia and Norway, over production levels for 2002 had caused the price of crude to slump. They fell to a low of $16 a barrel in the aftermath of 11 September and due to fears that supply would swamp demand next year.
Russia, Norway and other non-Opec countries are understood to have finally agreed to cut production by a total of 462,000 barrels a day. This has been accepted by Opec as near enough to its request that they cut by 500,000 barrels. Opec will fulfil its part of the bargain, which is to reduce supply by 1.5 million barrels.
Mr Al-Naimi said: "It is certain that they [non-Opec members] will carry out their pledges and that Opec will comply with the cuts."
Opec and producers outside the cartel will curb the supply of crude by two million barrels in total in a bid to lift oil prices to $20 to $25 a barrel. Opec eventually aims to lift prices back into the range of $22 to $28 a barrel, but analysts believe this will be difficult in the current difficult global economic conditions.
The International Energy Agency predicts a reduction in the rate of increase in oil demand for next year. It estimates demand will rise by 600,000 barrels a day – two-thirds of the average annual increase in the 1990s – as the world's biggest oil consumers, including the US and Japan, fight recession.
Opec's Cairo talks will be its seventh formal meeting this year, surpassing the record set in 1974. Cutting 1.5 million barrels would reduce Opec quotas to less than their 1999 levels, when prices were below $10 a barrel.Reuse content