Oil ministers from Saudi Arabia, Venezuela and Mexico yesterday gave the strongest hint yet that the Organisation of Petroleum Exporting Countries (Opec) will agree to cut oil production by as much as 1.5 million barrels a day when it meets in Vienna on Wednesday.
"The ministers see there is a need to take effective measures to balance the market and they agreed on the importance of taking required decisions within the coming days to reduce the level of the current surplus in production," they said.
The statement followed a meeting of Saudi Arabia's influential oil minister, Ali al-Naimi, and Venezuela's Alvaro Silva, both Opec members, along with Ernesto Martens from non-Opec Mexico in Madrid, Spain.
Opec is concerned about the oil market following the sharp fall in the price of crude oil in the wake of the 11 September terrorist attacks in the US. Last week, prices tumbled to beneath $19 a barrel, their lowest level in two years and well outside Opec's target price of $22 to $28 a barrel.
Only last Friday, Mr al-Naimi said cuts of 1.5 million barrels a day were increasingly likely, after large oil companies, such as BP and Shell, added their voices to those calling for output cuts.
In yesterday's joint statement, the oil ministers said they "noted with concern that the petroleum market, during the past few weeks, has continued to suffer from a lack of balance between supply and demand".
This, they said, was thanks to slowing world economic growth, exacerbated by the 11 September attacks, which had reduced demand.
The oil ministers agreed that despite the measures of producers to balance the market, "the level of supply had highly exceeded the level of demand".
Opec has so far cut production three times this year, reducing supply by 3.5 million barrels a day, or 19 per cent. The cartel, which has deferred making a production cut since September's terrorist atrocities for fear of being seen as profiteering, is widely expected to agree its fourth cut in output when it meets in Vienna on Wednesday.
Opec's secretary-general, Ali Rodriguez, indicated last week that the likely outcome was for a 1 million to 1.5 million barrels a day reduction.
The cartel is also keen to garner support for similar cuts from non-Opec producers, notably Russia, Norway and Mexico.
However, it is still unclear whether Mexico would contribute to an expected output cut while Norway has said it has no current plans to curb its oil output.
The Russian Prime Minister Mikhail Kasyanov said on Friday that Russian companies had proposed cutting supplies and that the government would support the plan.Reuse content