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24 Oct, 2008 04:50

OPEC cuts production by 1.5 million barrels per day

OPEC ministers are meeting in Vienna on Friday to discuss cutting output to support prices, with oil price hovering in the low to mid $60 BBL range, after falling below $70 and dropping to their lowest levels in 16 months. Exporters have said they would

After meeting for less than 2 hours the cartel had agreed to a cut of 1.5 million barrels per day as of next month, with a further cut possible in December, depending on how the market reacts.

Experts had been widely expecting a cut in production by the cartel, with speculation centreing on the size of the cut. Most are tipping a cut of a million barrels per day, but earlier in the week the Iranian oil Minister called for a cut of 2 million barrels per day.  Russia, which is the largest oil producer outside OPEC says it is not planning to cut production, but it has held talks with representatives earlier this week.

Ronald Smith, Head of Research at Alfa-Bank says he is expecting the Vienna meeting to agree to cuts of more than a million barrels per day.

“A million barrels a day is probably too little, since they moved up their emergency meeting from the middle of November to right before the US elections.  This is a very dangerous moment for them to be having an emergency meeting.  It underscores how seriously they are taking the situation – that it can’t wait. If its that serious you don’t do a million barrels a day, that’s already priced into oil prices.  If they only cut a million a day then watch for oil prices to drop immediately behind that announcement.    I’m personally expecting a million and a half, could be as high as two.”