updated 10/9/2006 11:35:07 AM ET 2006-10-09T15:35:07

OPEC is expected to make formal a deal to remove 1 million barrels a day of crude from oversupplied markets Monday, an OPEC source said, as ministers lined up to support the cut.

Iran, OPEC’s second-biggest producer, and Algeria publicly backed the reduction Sunday, which would be OPEC’s first since April 2004. The plan was made public on Thursday by a senior OPEC delegate.

“I think there is more or less consensus for (cutting) 1 million (barrels per day),” OPEC President Edmund Daukoru told Reuters by telephone Sunday. “The reference point is the (official) 28 million bpd ceiling.”

An OPEC source said Daukoru had written to oil ministers in the last two days seeking their backing for the supply curbs.

“It is expected that there will be a decision on Monday to cut one million barrels per day from the official ceiling after consultations between the ministers,” the source told Reuters.

Algerian Energy and Mines Minister Chakib Khelil said there was consensus to lower output.

Oil fell below $60 a barrel on Friday as investors doubted OPEC’s resolve to cut, in the absence of an official statement from the organization that pumps over a third of the world’s oil. U.S. crude settled at $59.76, off nearly $20 from a mid-July peak of $78.40.

The OPEC president, along with Iran, said the 11-member group would make the cuts from an official 28 million bpd ceiling — a move that could lead to tricky negotiations over a realignment of OPEC quotas.

The Organization of the Petroleum Exporting Countries is due for a scheduled meeting Dec. 14, but some members want to hold an emergency session this month to formalize the cut.

“What is important is that the market finds the OPEC position credible. That is why it is necessary to have a meeting to make a decision on the cut and to act on it,” Khelil said.

He said OPEC members were still discussing the possibility of an Oct. 18-19 gathering, an idea he said was supported by Algeria, Saudi Arabia, Libya and Venezuela.

Daukoru said he was not in favor of an emergency meeting. He said OPEC countries could implement cuts next time they set their monthly sales volumes to their customers.

Nigeria and Venezuela announced unilateral reductions just over a week ago.

A senior OPEC delegate said on Thursday that leading oil exporter Saudi Arabia would shoulder the biggest part of the burden as OPEC moves to address a 23 percent drop in prices since July 14 and brimming fuel stocks around the world.

The delegate said nine states would take part in the curbs and cut their “fair share” from overall output. OPEC pumped 29.5 million bpd in September, according to a Reuters survey.

Khelil said Algeria would reduce production, but did not say by how much. Iran said it would support an OPEC cut but that the group was still discussing the size of any reduction.

“The cut will be from the current production ceiling of 28 million barrels per day because otherwise it will have no impact on the market,” the official IRNA news agency quoted Iranian Oil Minister Kazem Vaziri-Hamaneh as saying.

The United Arab Emirates — OPEC’s third largest producer — and Qatar have yet to make a public comment. Iraq is not bound by OPEC quotas and Indonesia is a net importer.

OPEC last changed its ceiling in July 2005 with a daily increase of 500,000 barrels in response to rising demand from China and the United States and a seemingly relentless rise in oil prices.

OPEC’s plan to cut supply has disappointed the United States despite the high stocks cushion.

Copyright 2012 Thomson Reuters. Click for restrictions.


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
Cash Back Cards 17.80%
Rewards Cards 17.18%
Source: Bankrate.com