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OPEC agrees to 2 million barrel oil output cut as of Jan. 1

17 December 2008 15:03 (UTC +04:00)

Iranian and Nigerian energy ministers insisted on much larger cut in order to keep prices up.
Prior to this, OPEC cut output by 1.5 million barrels a day in October.
Todayâ€™s meeting in Oran is the fourth time in as many months to discuss production cuts after prices plunged more than $100 from Julyâ€™s record.

Azerbaijanâ€™s Minister of Industry and Energy Natig Aliyev is attending the meeting as observer because Azerbaijan is not an OPEC member.
Natig Aliyev told reporters on the sidelines of the meeting that Azerbaijan stands ready to offer an oil output cut of up to 300,000 barrels per day to support major producers in an attempt to bolster falling oil prices amid the deepening economic slump.

"We have production capacity of 1 million barrels per day, but currently output wend down to 840,000 barrels and we stand ready to further cut to 540,000 barrels and sustain this production for several months," he told reporters.

According to him, the country doesnâ€™t increase oil export to the possible 1 million barrels level so as not to fuel the market supply against the backdrop of the low prices.

The price of oil rose to about $45 a barrel on Tuesday following speculation that Opec could cut the daily supply of oil by up to two million barrels.
Chakib Khelil, OPEC current rotating president, who is also the Algerian Minister of Energy and Mines, said the group members have agreed to cut oil supply. He said that the $75 a barrel price target is a "fair price".
â€œIt is not ruled out that Azerbaijan may support an expected OPEC decision to cut output,â€ Azerbaijanâ€™s Minister of Industry and Energy Natig Aliyev told K2Kapital.

An official of Azerbaijanâ€™s Ministry of Industry and Energy, who wanted anonymity, told APA-Economics that Azerbaijan has halved oil export.
He said Azerbaijan is of the same mind with the OPEC offer to cut output and can reduce oil export by further 15%.

A day earlier, Turkeyâ€™s Haberturk reported about a 468 000 barrels cut in oil shipment through Baku-Tbilisi-Ceyhan pipeline which takes oil from Azerbaijan to Turkey, onward to the world markets.
BTC Co. Pipeline Company attributed the decline in oil pumping via this route to Azerbaijanâ€™s cutting oil output.

â€œBecause of transit problems, Azerbaijan will reduce oil production to 568 000 barrels in January from 781 000 barrels in December. For this, oil loading at Ceyhan Terminal is expected to decrease by 213 000 barrels next monthâ€.

BP-Azerbaijan told APA that oil output was affected by the shutdown of Central Azeri at Azeri-Chirag-Guneshli due to a gas leak since August.

Rovnag Abdullayev, President of State Oil Company of Azerbaijan (SOCAR), said oil production will be resumed at Central Azeri by late December.

BP-Azerbaijan said at least four platforms will be in operation at Azeri-Chirag-Guneshli next year.

US light crude for January delivery rose 90 cents to $44.50 a barrel on Tuesday, below about 70% from a record US$147.27 on July 11.

OPEC, which provides 40% of world oil supply, has cut output twice since September without halting the decline in oil prices which has slashed revenues for the groupâ€™s members and raised fears of a future supply crunch as investors pull money from costly exploration and production projects.

A modest cut of 520,000 bpd was made on Sept. 10 and then a 1.5-million one was announced on Oct. 24 in its Vienna meeting. But the two decisions both failed to revive the falling prices.

Later at its consultative meeting in Cairo on Nov. 29, the cartel decided to maintain crude oil output until its meeting in Algeriaâ€™s Oran.

OPEC is seeking the help of Russia, the worldâ€™s second-largest crude exporter, to share the burden of cuts. Russia may cut oil production by as much as 400,000 barrels per day as demand shrinks because of the global recession, Kuwaitâ€™s Oil Minister said late on Tuesday.

Russian President Dmitry Medvedev even said on Dec. 11 that the country is considering a membership of the cartel if it is in Moscowâ€™s national interests.

According to OPECâ€™s forecasts on Nov. 29, oil demand will not revive significantly until the first half of next year, given the concerns of a worldwide recession.

OPEC member countries are Algeria, Angola, Venezuela, Indonesia (quitted), Iran, Iraq, Qatar, Kuwait, Libya, Nigeria, Saudi Arabia, Ecuador and the United Arab Emirates. These countries share 60% oil reserves of the world. Saudi Arabia takes the first place for oil production among OPEC countries. OPECâ€™s daily output was 32.16 million barrels in September.