OPEC ministers support curbing excess supply, see quota cut ahead

Cairo (Platts)--9Dec2004

OPEC ministers arriving in Cairo Thursday a day ahead of the group's formal
conference gave near-unanimous support to a move to rein in excess production
above nominal output quotas in response to the recent fall in oil prices.
Although most ministers said they expected the ten-member output ceiling of
27-mil b/d to be left in place for the time being, several said a reduction in
quotas would be needed to cope with the expected fall in demand in the second
quarter of next year. The oil ministers of Iran, Kuwait, Libya and Venezuela
Thursday all voiced their support for a reduction in the surplus output
currently being pumped above OPEC's ten-member output ceiling of 27-mil b/d.
"Everybody is looking to cut the over-production," said Kuwaiti oil minister
Sheikh Ahmed Fahed al-Sabah. "In the beginning we should cut all
over-production, that would be about 1-mil b/d," the minister said. "We have
to cut over-production to go to the ceiling that we decided in the last
meeting, 27-mil b/d," he said.

Venezuela's Rafael Ramirez said OPEC needed to act to stop oil prices
continuing their downward trend of recent weeks. "Venezuela believes we have
to take a decision in OPEC to defend the price, maybe to reduce
over-production," the minister told reporters. "We have to see if we have to
reduce over-production," he said, adding there was "near to 1-mil b/d in
over-production." Iran's Bijan Zanganeh said he did not expect ministers
meeting Friday to reach a consensus to cut the group's formal crude output
quotas, but that he believed a reduction in the 27-mil b/d ceiling would be
needed in the second quarter. "I don't believe in this moment we can reach
unanimity for a cut in the ceiling," Zanganeh said. "We think we should start
to comply with our previous decision," he said. Asked whether this would imply
all OPEC members adjusting output to bring production in line with quotas,
Zanganeh said: "not everybody."


Libyan oil minister Fathi bin Shatwan said he also thought OPEC should trim
physical supply. "I think we should do something, like cutting for instance
1-mil b/d, 500,000 b/d, something like this," Shatwan said. Asked whether he
was referring to a cut in over-production above OPEC's nominal output ceiling
of 27-mil b/d or a reduction in the quotas themselves, the Libyan minister
said: "There are two steps, one of these is to comply with the 27-mil b/d,
that is one step. the other is to cut another 1-mil b/d." Algeria's Chakib
Khelil was another minister calling for improved compliance. "Normally we
should not have any over-production since we have quotas and we are to abide
by them. We should like to see more respect for the quotas," Khelil said. "We
should make sure we have prices that stabilize by...making sure there is more
discipline in production, at least for the first quarter," he said. Khelil
said OPEC may have to meet again before its next scheduled conference in March
to reassess output policy for the second quarter, when demand typically falls.


Kuwait's Sheikh Ahmed also urged his fellow ministers to look ahead to the
second quarter of next year, when demand is expected to fall after the
northern hemisphere winter ends. "We have to think from now what we will do in
March, because in March we think the share of OPEC or the demand for OPEC oil
will go to 26-mil b/d instead of 29-mil b/d. For that, we have to be careful
about the situation and study the market very well," he said. Ali Naimi, oil
minister of OPEC's most powerful member Saudi Arabia, said Wednesday the
cartel needed to take action to ensure oil market stability, but on Thursday
said he was keeping "an open mind" on the outcome of the meeting.

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