OPEC expected to cut production

The Organization of Petroleum Exporting Countries (OPEC), which supplies more than 40 percent of the world’s oil, is meeting to discuss more production cuts after crude prices dropped 70 percent from July’s all-time high of $147.27 a barrel.

The Trucker News Services

12/16/2008

OPEC may need to cut oil production by 2 million barrels a day a Wednesday meeting to boost prices amid demand slumps.

The Organization of Petroleum Exporting Countries (OPEC) is meeting to discuss more production cuts after crude prices dropped 70 percent from July’s all-time high of $147.27 a barrel.

“There is too much oil on the market right now,” said Johannes Benigni, CEO at consultants JBC Energy GmbH in Vienna. “Whatever they do now, presumably more than a 2 million barrels a day cut, is going to help, but what helps the psychology is that Russia has also announced they may join in.”

The International Energy Agency reported global oil demand will fall this year for the first time since 1983 as worldwide recession cut energy consumption.

Oil stockpiles are rising as the winter approaches, which is opposite of what normally happens, so a production cut of that size is needed to restore the balance of supply and demand.

An Iranian delegate said OPEC should aim to reduce oil industry stockpiles to about 52 days worth of forward demand, from recent levels of more than 56 days. The final decision on supply cuts will depend on what price level OPEC members want, the official said.

Oil ministers from Algeria, Kuwait, Qatar and Libya have said they support such a cut. OPEC is asking Russia, the largest oil exporter outside the group, to reduce oil output by between 200,000 and 300,000 barrels a day to help revive prices.