Opec ministers meet to slash oil production

MINISTERS FROM the top oil producing countries began arriving in Vienna yesterday for a high-level Opec meeting tomorrow, which is expected to rubber-stamp a deal to slash oil output and end the two-year slump in the oil price.

The meeting follows the agreement thrashed out by five oil ministers in The Hague on March 12, under which the 10 Opec members will cut production by 1.7 million barrels per day from next month. That corresponds to around 2.7 per cent of global output of crude.

Gulf officials were quoted yesterday on arrival in Vienna saying that the deal would result in Brent crude, the benchmark oil price, rising from its current level of around $13.45 a barrel to between $17 and $19 by the third quarter of this year.

Prices have already risen by around 40 per cent from their December lows in anticipation of further output cuts.

The deal struck earlier this month at the instigation of Saudi Arabia was endorsed by three more states - Kuwait, the United Arab Emirates and Qatar - at a meeting in Abu Dhabi yesterday. The Kuwaiti oil minister, Sheikh Saud Nasser al-Sabah, said after the meeting: "We are finished - it is all done."

What made the Hague deal possible was a decision by Saudi Arabia and Iran to bury the hatchet.

Officials said that progress had been made on the notoriously slippery issue of widespread non-compliance, which undermined the effectiveness of previous rounds of production cuts.

One Gulf official told agency reporters yesterday: "There are no fears this time about compliance. Every country is willing to comply fully. They have seen the consequences when they do otherwise."

However, oil industry executives say that producers are around 25 per cent short of meeting their agreed cutback targets and remain sceptical about the likelihood of things changing this time around.