LONDON, 10 October 2006 — OPEC President Edmund Daukoru has proposed to OPEC members that they should cut their oil output by one million barrels per day (bpd) but no agreement on this has been reached, a spokesman for the organization told AFP yesterday.
“There has been a suggestion by the OPEC president to the OPEC ministers to consider cutting by one million (bpd) since the market is heavily oversupplied but there is no agreement yet,” the spokesman said.
The oil market has been watching for several days for any signs that OPEC might cut production to shore up prices which have fallen sharply recently, and news of the proposal to cut output pushed up prices early yesterday. Daukoru made the proposal in a letter sent to ministers of the Organization of Petroleum Exporting Countries, and consultations continued, he added, though for now, no meeting of OPEC ministers was planned. “There’s no meeting set,” the spokesman said. “It is under discussion but there might not be a need for a meeting,” because the ministers might agree to the plan without having to get together physically.
Saudi Arabia, Iran and Venezuela have pushed for a meeting in Vienna next week to ratify the agreement to show organization unity, but the Financial Times reported yesterday that other members, including Nigeria, believe a communique would be sufficient.
Citing an unnamed OPEC official, however, the newspaper reported that a meeting was nevertheless likely, with Oct. 18-19 being the preferred dates at the moment.
On Sunday, Iran, OPEC’s second-biggest producer, threw its support behind moves by the organization for an emergency meeting to cut a long-standing output quota to shore up slumping oil prices. “Iran supports any OPEC production cut,” said Oil Minister Kazem Vaziri Hameneh was quoted as saying by the state news agency IRNA. The 11-member organization has maintained an output quota of 28 million bpd since June 2005. A cut in output is seen as aimed at supporting the price of oil on world markets, which has slumped by about 20 percent in recent weeks owing to easing supply concerns.
World oil prices jumped back above $60 per barrel yesterday. Dealers said the news from Pyongyang had sparked geopolitical concerns that the development might embolden major crude producer Iran to pursue its own nuclear energy program.
New York’s main contract, light sweet crude for delivery in November, leapt 79 cents to $60.55 per barrel in pit trading.
In London, Brent North Sea crude for November delivery jumped by $1.15 to $60.98 per barrel in electronic trading.
Crude futures “were higher on heightened geopolitical tensions following news that North Korea conducted nuclear tests over the weekend and as OPEC looked set make a formal announcement” regarding output, Sucden analyst Michael Davies said.
The oil market has been watching for several days for any signs that OPEC might cut output to shore up prices.
Barclays Capital analyst Kevin Norrish remained skeptical, however.
“Our view is that the major OPEC producers do strongly favor a production cut, though a clear consensus on this issue from all OPEC members has yet to emerge and some further work is required,” he said.
A cut in output is seen as aimed at supporting world oil prices, which have tumbled by more than 20 percent since striking record peaks earlier this year, owing to fading supply concerns.