Opec sets 1.5m bbl/day cutback - if others cut 500k bbl

14 November 2001 20:32  [Source: ICIS news]

HOUSTON (CNI)--The Organisation of Petroleum Exporting Countries (Opec) called Wednesday for a 1.5m bbl/day cut in output beginning 1 January but conditioned that reduction on a simultaneous 500 000 bbl/day cutback by non-Opec producers.

The Opec ministers said in a statement following today's extraordinary meeting in Vienna, Austria that "the impact of the current global economic slowdown on the oil market requires firm and concrete co-operation between Opec and non-Opec oil producing countries in the form of equitable sharing in further reductions."

Consequently, the Opec oil ministers said they have "decided to reduce an additional volume of 1.5m bbl/day, effective 1 January 2002, subject to a firm commitment from non-Opec oil producers to cut their production by a volume of 500 000 bbl/day simultaneously."

But if the Opec member states' production cutback is dependent on agreement by non-Opec producers to make a combined 500 000 bbl/day reduction, implementation of any production rollbacks may be in doubt. Russia has agreed to cut production by some 30 000 bbl/day, but that minor reduction is viewed as barely a token gesture to Opec and unlikely to have market impact or motivate other non-Opec producers toward the 500 000 bbl/day cutback sought by Opec.

While today's Opec statement welcomed "the positive responses expressed by some non-Opec producers," it made no mention of Russia. The Opec ministers said that "contacts with non-Opec producing countries [will] continue," apparently in hopes of getting the 500 000 bbl/day reduction that would enable Opec's promised 1.5m bbl/day reduction with the new year.

Market analysts note that if Opec fails to secure the co-operative 500 000 bbl/day reduction by non-cartel producers, Opec nations would risk losing market share if they implement unilaterally their 1.5m bbl/day cutback.

The next regularly-scheduled Opec ministerial conference is scheduled for 12 March next year.

By: Joe Kamalick
+1 713 525 2653

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