CAIRO, 10 December 2004 — OPEC oil producers said yesterday that today’s ministerial meeting would rein in oversupply to bolster falling prices and that the organization would have to reduce output quotas early next year.

Ministers from Kuwait, the UAE, Libya, Venezuela and Algeria urged the group to cut back on more than one million barrels per day (bpd) of supply in excess of quota targets after oil prices this week fell to four-month lows. “I think we have to cut off all our overproduction,” said Kuwait Oil Minister Sheikh Ahmad Al-Fahd Al-Sabah. “I think over the last six weeks the prices were a surprise for everybody.” Producers fear rising inventories in consuming nations could further lower prices which have already dropped by $13, or nearly 25 percent from record highs in late October.

Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali Al-Naimi, who has played down fears of a glut, said yesterday he came to the meeting with an open mind.

OPEC’s second biggest producer Iran said OPEC would need to cut an existing 27 million bpd output target for the second quarter when demand seasonally declines. Kuwait also called for a second quarter cut in quotas. “All the OPEC suppliers want to manage the market and not to witness a shock,” Iranian Oil Minister Bijan Zanganeh said.

OPEC will meet again in late January or early February, officials said. US crude was up 56 cents at $42.50 a barrel yesterday. The Organization of the Petroleum Exporting Countries has been producing at the highest level in 25 years to meet rising demand in the United States and China and compensate for disruptions to supply from Iraq.

OPEC’s ministerial monitoring committee, which advises the conference on market conditions, will recommend that the group now pull back supply to comply with existing output quotas, a cartel delegate said. “Overproduction has achieved its purpose of bringing the price down,” said Nigerian Presidential Adviser on Petroleum Edmund Daukoru. “It was not meant to crash the price, it was meant to moderate the price.”

Consumer nations have urged OPEC not to pull back production, saying oil stocks must rebuild to calm volatile prices and underpin economic growth. “Given where inventories are, OPEC production probably needs to stay about where it is. We think on average we’ll need more OPEC crude next year than we got this year,” said Guy Caruso, head of the US government’s Energy Information Administration. Most of the burden of any OPEC output restraint would fall on top producer Saudi Arabia as it has been producing around 9.5 million barrels per day since August, 890,000 bpd over its quota limit.

Winter heating fuel stocks in major consuming centers are low and will come under strain if the northern winter is severe, analysts warn.

A fall in US natural gas stocks helped push prices up yesterday. Crude prices are still around 30 percent above the start of the year but a fall in the dollar’s value has further eroded OPEC’s revenues from its sales, denominated in the US currency.