OPEC expected to cut oil output after Russian reduction
Thursday, December 6, 2001
LONDON -- OPEC is poised to trigger a 6 percent cut in its official crude oil output after Russia, relenting to intense pressure, agreed to reduce its production by 150,000 barrels a day to help prop up sagging oil prices.
Russia's decision Wednesday ended a showdown with the Organization of Petroleum Exporting Countries that threatened to unleash a price war for crude. One energy analyst forecast that the overall decrease in oil output would nudge gasoline prices higher but said he expected the rise would be modest.
Oil futures surged almost $1 higher on the news, then fell back as skepticism grew about Russia's resolve to honor its commitment.
OPEC was preparing to issue a communique Thursday announcing it would proceed with cuts of 1.5 million barrels a day in its own production, said an official from the group's headquarters in Vienna, Austria. OPEC's secretary-general, Ali Rodriguez, was conferring with OPEC oil ministers on the document's wording, the official said.
After the decision in Russia, attention shifted to Norway, the world's third-largest exporter of oil behind Saudi Arabia and Russia. OPEC has asked Norway for similar cuts.
A firm commitment from Norway, together with the pledge from Russia, would come very close to satisfying OPEC's demand that oil-producing countries outside the group cooperate with its plan to reduce its own production by 1.5 million barrels a day, or 6 percent. OPEC supplies about a third of the world's oil.
"I think it makes triggering the OPEC cuts a near certainty," said George Beranek of The Petroleum Finance Co., a Washington consultancy.
"That's going to mean, over time, higher crude prices, which will be reflected in higher refined product prices," he said.
However, energy analysts noted that U.S. inventories of gasoline and other refined products are plentiful. "I really don't think we have to worry about a return to last spring's very high gasoline prices," Beranek said.
In an unusual act of diplomatic brinksmanship, OPEC insisted last month that non-OPEC producers promise to trim their output by a total of 500,000 barrels a day before it would put its own cuts into effect Jan. 1.