OPEC ministers agree to rein in 1-mil b/d oil oversupply

OPEC ministers meeting in Cairo Friday agreed in informal talks to cut their crude output back to their self-imposed ten-member output ceiling of 27-mil b/d, an OPEC delegate said. The decision is expected to remove around 1-mil b/d of excess production above quota levels from world markets, he said. Worried by the sharp fall in world oil prices in recent weeks, which has seen benchmark US crude futures drop 25% from their record peak in late October, ministers gave near-unanimous support in the run-up to the meeting for a move to improve discipline with existing quotas rather than look to adjust the ceiling.

A Platts survey estimated output by the 10 OPEC members bound by quotas at 28.02-mil b/d in November, more than 1-mil b/d above official limits. OPEC is also expected to agree to meet again early next year to review output, with some ministers saying a cut in the ceiling will be needed to pre- empt the expected fall in world demand for oil in the second quarter of 2005.

Ministers have been considering a proposed date of Jan 31 to meet again in Vienna in their informal, closed session, but the decision has not yet been finalized, the delegate said. The decision to enforce stricter compliance with the existing quotas is due to be rubber-stamped by OPEC's formal ministerial conference later Friday. It was also not clear when any reduction in supply might be noticed in the market. "January is not possible, it's a technical matter because of the nomination of the cargoes," Iranian oil minister Bijan Zanganeh said ahead of the informal talks, adding cuts would "probably" start from February.

The Saudi-owned al-Hayat newspaper quoted unnamed ministerial sources Friday as saying they expected Saudi Arabia to cut its January nominations by 500,000 b/d if there was an overall agreement in Cairo to cut the over-production. Saudi Aramco nominations to customers are due next week.