Hisham Nazer, the Saudi oil minister, said on Saturday that the cut should be divided among producers according to their share of output. His statement came after he had met Alirio Parra, the Opec president, who is touring member states in an attempt to drum up a consensus on cuts before the next meeting on 13 February.
No one doubts the need to slash production. Opec ministers decided in November that production in the first three months of this year should be no more than 24.9 million barrels a day, but in December it reached 25.27 million, the highest level since 1980.
The price for the international marker Brent crude has fallen from dollars 21 to dollars 17 since October and oversupply is so acute that even renewed military activity in the Middle East had no lasting effect.
The market has become increasingly sceptical as statements about output cuts have failed to lead to action. Part of the problem has been that Kuwait has been building up its output again and refuses to slow this process down.
More critical is the antagonism between the two biggest producers, Saudi Arabia and Iran, which refuse to make unilateral cuts.
That is why the latest announcement is important, according to Joe Stanislaw, managing director of Cambridge Energy Research Associates in Paris.
'Saudi Arabia is the key element,' he said yesterday. 'If it can establish leadership in the price-cutting process we could have the basis for an agreement.'
Dr Stanislaw said that if Mr Parra succeeded in finding common ground during his meetings this week, the next Opec meeting could be fruitful.
Mr Parra's job is to come up with an agreement that the oil market believes will lead to real production cuts. The Weekly Petroleum Argus says he wants to introduce an 'innovative mechanism' to stabilise prices. This could be a floor price that triggers automatic volume adjustments, or a formal quota mechanism.Reuse content