OPEC to cut quotas again

March 9, 2001
Web posted at: 15 1 GMT

LONDON (CNN) - Oil cartel OPEC may cut oil production for the second time this year at next Friday's meeting in Vienna, analysts said.

Consensus is growing that the Organisation of the Petroleum Exporting Countries (OPEC) will cut quotas, but the size of the cut and its effect on oil prices is keeping markets guessing.

A large production cut could send oil prices upwards, further damaging the already fragile world economies. OPEC, on the other hand, doesn't want to see oil prices fall below $25 a barrel.  

"There seems to be growing consensus that OPEC will cut output between 0.5 and 1 million barrels a day at the meeting," Lawrence Eagles, an oil analyst at GNI, told clients in a note on Friday. He suspects this might be more like 500,000 to 750,000 million barrels a day.

The expected production cut comes as oil prices come close to the $25 a barrel level. That's below the cartel's target, according to Venezuelan Energy and Mines Minister Alvaro Silva said

Brent Crude futures for April delivery fell just 15 cents to $26.53 a barrel in late trading on London's International Petroleum Exchange.

The cartel, which produces 40 percent of the world's oil, has already cut quotas by 1.5 million barrels a day in January to ward off any price slide during the seasonal demand downturn in the second quarter.

OPEC's eleven members – Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela – are heavily reliant on oil export revenues.

The cartel wants to avoid a repeat of a 1998 crash in oil prices, when a barrel of crude hit a low of $9.95, as a financial crisis in Asia began to bite.

However, OPEC will have to weigh the effect higher prices, caused by a production cut, will have on the U.S, which is the world's largest fuel consumer. Higher oil prices would further impact an already slowing economy which would damage other economies which depend on the U.S. for exports. 

But refiners are unlikely to start stock building just yet as there is a feeling that the current low prices could continue, Eagles said. This, combined with more active Iraqi sales, could keep prices down despite a production cut.

OPEC oil cut could depress fragile world economy
Feb. 20, 2001
OPEC cuts 1.5 million barrels a day
Jan. 17, 2001

OPEC

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