OPEC to cut output on voluntary basis: secretary-general

Paris (Platts)--28Sep2006

OPEC member countries have agreed to cut production on a "voluntary"
basis to stem the fall in crude oil prices, OPEC acting secretary general
Mohammed Barkindo said Thursday.

"It's an understanding to moderate the supply in line with the demand.
There is not a deal as such. They are going to do it on a voluntary basis
first to see how the market reacts before they can decide anything," Barkindo
told Platts.

Nigeria's state oil company NNPC said it was cutting crude exports by 5%
from October 1, representing a reduction of 120,000 b/d from Nigeria's current
production of 2.39 million b/d.

"We have already informed traders and our producers. "We sent letters
yesterday to cut by 5%. Any loading should be minus 5% from October 1," NNPC's
head of crude oil marketing Aminu Baba Kusa said.

"In view of the current crude oil market activities, we are directed to
inform you that all export cargoes for the month of October 2006 should be
loaded at minimum tolerance of minus 5%," the letter said, according to a copy
obtained by Platts.

Nigeria's decision follows concern voiced by other OPEC countries about
the recent fall in prices, which last week slumped to nearly a six-month low.

Barkindo said OPEC president Edmund Daukoru, who is also Nigeria's oil
minister, had started consultations with other member countries.

NIGERIA LEADING BY EXAMPLE

"The whole idea is to see what you can volunteer on your own, that is why
he (Daukoru) came out with the 5% from Nigeria just to show them what he can
do first before requesting the others to cut," he said

Crude traders said the Nigerian decision appeared to show OPEC's desire
to prevent farther price falls.

"OPEC (members) are finding that they are building stocks too fast and
they need to cut. This is evidence of individual countries cutting production,
an indication to the market that $55-60/barrel is acceptable for the OPEC
basket," said one trader.

Others were more skeptical, saying the move could be linked to technical
issues with production and might simply lead to an increase in spot exports to
offset the lower term volumes.

"Maybe they have production problems or they want to optimize prices. I
think it's more a technical motivation related to production than it is
optimization (of prices)," said one West African crude trader.

SAUDIS ALSO CUTTING

Barkindo also said he met with Saudi Arabia's oil minister Ali Naimi in
Riyadh earlier this week and that the world's number one exporter was already
cutting its production.

"Definitely, I have spoken with the Saudis in Riyadh and they are
continuing to cut. They are cutting," he said.

OPEC kingpin Saudi Arabia, whose word holds much sway within OPEC as the
group's biggest producer, has not officially made its position public. But
Naimi said in Vienna that the cartel would not concern itself with short-term
price fluctuations in setting policy.

Algerian oil minister Chakib Khelil, who was among ministers consulted by
Daukoru, said he did not think prices would fall much below $60/barrel and
predicted they would rebound on strong demand early in 2007.

He dismissed talk of an emergency OPEC meeting before the group's next
scheduled conference in the Nigerian capital Abuja on December 14, saying it
was not necessary at this time.

"We think the meeting in Abuja is a good opportunity to take the
necessary decisions if there is a need," he said.

"There is always coordination among members. We are in constant contact
and we gave the president the power to call a meeting if necessary, but so far
this has not been judged necessary" said Khelil, speaking after a meeting of
the National Assembly.

"We think that prices will pick up and be reinforced early next year...
The fall in oil prices is due to a fall in demand, which is normal at this
time of year because it is the end of the summer season and weather conditions
are good," he said.

Libya has not yet made a decision to cut back production, the country's
OPEC governor Tarek Hassan-Beck said.

"No not yet," he said, when asked if Libya had agreed to trim back
production. "I don't think there is reason to cut back. The prices are not at
the level that might dictate it, not yet."

Kuwait has also amde no decision so far to rein in output, a senior
official from the Kuwait Petroleum Corp said.

"Kuwait will not cut production" based on current prices, the official
said. "$60 is still acceptable for OPEC."

"As far as Kuwait is concerned, I am 100% sure we are not cutting
production," he said, adding that Kuwait was "producing and will continue to
produce 2.6 million b/d."

--Jacinta Moran with Lies Sahar in Algiers
--Alex Kwiatkowski in London
--Miriam Amie in Kuwait City
newsdesk@platts.com

For more news about OPEC, please see the related Platts feature at
http://www.platts.com/Oil/Resources/News%20Features/opec/


 

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