January 18, 2001. Copyright 2001. Graphic News. All rights reserved.

OPEC TRIMS OUTPUT BY 5.6%

LONDON, January 18, Graphic News: OPECÕs decision to curtail its crude oil output by 5.6 percent marks a victory for Saudi Arabia and other moderate members over price hawks Libya, Iraq and Iran, who had argued for deeper cuts in production.

Cutting output by 1.5 million barrels a day from February 1 -- aimed at keeping crude prices afloat near $25 a barrel -- the Organization of Petroleum Exporting Countries warned it was willing to slash output again at its next meeting.

Secretary-General Ali Rodriguez said that the 11-nation cartel could consider reducing output by as much as another million barrels a day in March.

That will depend on where oil prices, now near the middle of the groupÕs preferred $22-$28 range, move in coming weeks.

OPECÕs Rodriguez said producers had been determined to stem a decline in oil prices from a recent 10-year high of $35.

ÒStocks are increasing and in the second quarter we saw a sharp fall in prices coming,Ó he said. ÒWe wanted to maintain the stability of the market and, of course, of prices.Ó

OPEC took the decision despite fears among major importing nations that it could spell trouble for decelerating economies in the West by raising energy costs again.

Yet the one OPEC member omitted from WednesdayÕs quota agreement, Iraq, is also the one most capable of subverting it -- and of causing pain at the pump for consumers in oil-importing nations.

Iraq is an important member of OPEC, but hasnÕt participated in the groupÕs production agreements since the Gulf War. 

As a result of a pricing dispute with the United Nations, which regulates all its exports, Iraq slashed its crude exports by approximately 1.7 million barrels a day and shipped just 671,000 barrels a day last week. 

That sets up Iraq as OPECÕs biggest wild card -- a country with a record of unpredictable behavior and an ability to turn its exports on or off in a matter of days.

February contracts of U.S. benchmark light, sweet crude traded at $29.60 per barrel on the New York Mercantile Exchange. North Sea Brent, the European benchmark crude, closed at $24.79 per barrel on the International Petroleum Exchange in London.
/ENDS
Sources: Associated Press, Reuters