OPEC to cut output by 3.5 percent

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Last updated at: (Beijing Time) Thursday, September 25, 2003

OPEC to cut output by 3.5 percent

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The Organization of Petroleum Exporting Countries, including Iraq, agreed to cut production quotas by 900,000 barrels a day, or 3.5 percent, concerned about declining prices, an official at the group said.

The accord was reached at a meeting in Vienna, Austria, and ministers will gather again on December 4, the OPEC official said, declining to be identified. The reductions from the old target of 25.4 million barrels a day begin November 1, he added.

Iraq joined its 10 fellow OPEC members for talks for the first time since the toppling of Saddam Hussein.

Iraqi delegates returned to the table at the cartel's head-quarters after Venezuela backed down from its opposition to Iraq's full participation in talks on OPEC's output strategy. Venezuela's reversal cleared the way for OPEC to focus on the nitty-gritty of assessing global supply and demand for crude during the coming winter months.

Brent crude for November settlement rallied 65 cents to US$26.17 a barrel on London's International Petroleum Exchange yesterday noon. Ministers throughout their talks had said they anticipated no change in the targets.

"There will be a big surplus in the first half, and they will need to deal with it," said Roger Diwan, a managing director at Washington-based consultants PFC Energy, before the decision.

Crude oil in London has averaged US$28.29 a barrel in 2003, US$10 more than the 1990s average, boosting income within the OPEC and profit at oil companies such as BP and Exxon Mobil Corp. Prices may fall in 2004 as Iraqi exports and rising output in Russia overwhelm demand, according to a survey conducted by Bloomberg News .

Oil prices have dropped 13 percent in the past month for OPEC's benchmark, to US$25.14 a barrel.

OPEC, excluding Iraq, agrees to set quotas to keep the price of its oil index between US$22 and US$28 a barrel.

Ministers maintained quotas at their last two meetings, held in June and July, amid expectations OPEC would need to reduce supply to make room for Iraq.

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