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18 Dec, 2008 04:15

OPEC panics over price scare

OPEC has announced a cut in production of 2.2 million barrels a day from next year to try to boost oil prices. It is the largest single reduction made by the oil cartel in its history.

The move is aimed at stemming crude prices that has fallen below $US 50 per barrel from the summer record of $US 150.

OPEC President Chakib Khelil told journalists that the reduction was necessary as “we are in a very, very deteriorating environment”. He urged other oil-producing countries to follow the example of the key exporters to maintain the world market stability.  
OPEC countries, that control about 40 percent of all oil production, have been meeting in Algeria with the backdrop of the global recession sending prices into free-fall.

Russia, which isn't an OPEC member, is expected to curb output by up to 320 thousand barrels a day to try to reverse the price slump.

Deputy Prime Minister Igor Sechin says Russia's involvement in OPEC could range from being granted observer status, to full membership.

Oil analyst Timothy Sutherland thinks greater co-operation with OPEC is likely to continue, given Russia's importance as a producer.

“It has been reported that Russia will continue to have some form of systemic involvement with discussions with OPEC, as Russia counts for 12 percent of world oil production,” he said, “I am sure that the dialogue, if they don’t actually join, will continue to be quite intense.”

Related links 
Russia moves closer to OPEC ahead of oil production cut
OPEC: to join or not to join?