Opec prepares to cut output

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Opec prepares to cut output

By David Buchan and Robert Shrimsley Published: November 19 2000 16:55GMT | Last Updated: November 19 2000 18:01GMT

Opec oil producers indicated on Sunday that their next likely change in output would be a cut, despite US-led calls from consuming nations for increased supply to bring prices down.

But the tone of a meeting in Riyadh at the weekend, bringing together ministers from 40 producing and consuming countries including Opec, the US, the European Union and Japan, was surprisingly unconfrontational, given that oil prices remain at more than $30 a barrel.

At the seventh meeting of the International Energy Forum in the Saudi capital, producing and consuming countries refrained from pushing their respective cases too hard.

Ali Rodriguez, Opec's current president and Venezuelan oil minister, said the cartel's analysis was that world supply exceeded demand of 76m barrels per day by 1.4m bpd, that global stocks of crude and refined products now reached 80 days worth of consumption, and that when these stocks reached 90 days level prices would start to fall. So Opec was poised to start cutting output back at its next meeting in mid-January.

Ali al-Naimi, oil minister of Saudi Arabia, Opec's dominant producer, stressed the issue for the January meeting was production cuts. That was, he told the Middle East Economic Survey, "the reason for not putting any additional crude supply on the market now, because then you risk creating a swell and consequently the need for a bigger cutback".

He added that there would be a "phantom" quality to any cutbacks next year simply because not all Opec countries had really increased output over the last year by as much as they claimed. Saudi Arabia could, he said, raise production by 1.8m pbd in a 90-day period to help fill any sudden supply shortage, such as cutbacks by Iraq.

Bill Richardson, US energy secretary, told Opec of Washington's "strong preference for a range of $20 to $25 a barrel". Significantly, however, he said he did not use a bilateral meeting with his Saudi counterpart to call for output rises.

Mr al-Naimi claimed the Riyadh conference ended with "no big difference" on prices, with Opec's proclaimed target of $22-$28 a barrel not far above the US preference.

The Riyadh meeting showed "the era of confrontation between producers and consumers is over", claimed Mr Richardson, who was this weekend the first US energy secretary to attend such a conclave with the Opec cartel. One of the reasons for US participation, Mr Richardson had made clear, was to foster a climate of co-operation that would, at a time of renewed Israeli-Palestinian conflict, deter Arab oil producers from thinking of using "the oil weapon" as they did in 1973.

Saudi Arabia has proposed a permanent secretariat for the International Energy Forum, which meets only occasionally at ministerial level with its next session set for 2002 in Tokyo. Mr Richardson said the US would study the idea, which was welcomed in principle by Helen Liddell, the British energy minister who attended the meeting.

http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT38XJPYQFC&live=true&useoverridetemplate=ZZZFKOXOA0C&tagid=ZZZCWHK1B0C&subheading=energy%20%26%20utilities

-- Martin Thompson (mthom1927@aol.com), November 19, 2000


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