Opec minister hints at 'drastic' cut in output

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Opec minister hints at 'drastic' cut in output

By David Buchan, Energy Correspondent Published: July 20 2001 17:02GMT | Last Updated: July 20 2001 19:45GMT

Opec may have to cut output drastically to support sliding oil prices, Ali al-Naimi, oil minister of Saudi Arabia, the cartel's dominant producer, said on Friday.

His warning came amid reports that Chakib Khelil, Algeria's oil minister and Opec president, was sounding out other cartel ministers on a possible emergency meeting.

The next meeting of the cartel, which produces around 25m barrels a day or roughly one third of world output, is scheduled for late September. But the price of the basket of Opec crudes fell on Thursday to $22.78 a barrel, or close to the floor of the $22-28 range Opec has been targetting.

If this stays below $22 for 10 consecutive days, Opec has, in theory, an automatic agreement to cut production by a collective 500,000 b/d. But Mr al-Naimi hinted at tougher and quicker action.

He said: "The reason the situation now is grave is that all sources of information lead us to believe that we are heading for a crisis, that demand is diminishing, that supply is excessive and that if Opec is to maintain its band it should take drastic action to reduce production."

Mr al-Naimi was speaking on the sidelines of the international climate change conference in Bonn, where he also conferred with Ali Rodriguez, the Opec secretary-general, and Rilwanu Lukman, Nigeria's oil minister.

However, Mr al-Naimi cautioned that while Opec was ready to cut output, "we want to be sure that when we do, we do not create another crisis and misread what we are being told".

According to a draft of the communique to be issued later at the Genoa summit, leaders expressed concern about the high level and volatility of oil prices, which tripled in 1999-2000 only to start last December sliding unevenly downwards.

Opec formally decided to cut its total production quotas this spring by 2.5m b/d to 24.2m b/d, but the habitual cheating by some of its members on their quota reductions is thought to have left the cartel's output a bit higher. Earlier this month, Iraq, an Opec member outside the quota system, ended one of its periodic rows with the United Nations and resumed exports.


-- Martin Thompson (mthom1927@aol.com), July 22, 2001

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