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OPEC Official Says Some Members to Cut Exports

September 29, 2006|From Reuters and Bloomberg News

Some members of OPEC have decided to reduce their crude exports because of a slowdown in demand, after prices fell sharply from record highs, a top cartel official said Thursday.

The world's eighth-largest exporter, Nigeria, will cut supplies 5% starting Sunday and some other countries in the group already have voluntarily trimmed sales, acting Secretary-General Mohammed Barkindo told Reuters.

One Nigerian oil industry source said Nigeria, Saudi Arabia and Kuwait were involved in an informal arrangement to cut supplies and stem the price drop.

But a Persian Gulf oil source said Kuwait's production was steady and there had been no order to cut supply. Saudi oil officials could not be reached for comment.

Many members of the Organization of the Petroleum Exporting Countries were pumping near full tilt for most of this year, ignoring quotas, as prices soared to record levels.

OPEC members normally raise production in the fourth quarter, which represents the peak season for demand as refiners make fuels for the Northern Hemisphere winter.

But oil has tumbled from a peak of $77.03 a barrel in mid-July. Near-term futures in New York ended at $62.76 a barrel Thursday, down 20 cents.

The price fell below $60 this week.

The slide prompted OPEC President Edmund Daukoru, who is also Nigeria's oil minister, to hold consultations with other ministers of the 11-member group.

Barkindo said consultations were still underway. Oil ministers are due to meet in person on Dec. 14 in the Nigerian capital Abuja.

The 20% drop in prices in two months has many members worried, in particular Nigeria. Daukoru said earlier this week that "something had to be done" to steady the price.

"OPEC has made some hawkish comments over the last week, which shows a commitment by them to protect the price," said Katherine Spector, an analyst at JPMorgan Chase & Co.

On Sept. 11, OPEC said it expected to keep production steady at 28 million barrels a day, but the New York futures price on that day was still above $65.

"OPEC might go with this informal agreement and wait until the next meeting in order to get a full agreement on a cut in quotas," said Jason Schenker, an economist at Wachovia Corp.

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