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OPEC delays cuts in oil production until Norway specifies reduction in its output Russia’s pledge to cut output ended a showdown with OPEC that threatened to unleash a price war for crude; cartel expects Norway to match Russia’s cut Bruce Stanley Associated Press Business Writer
OPEC has delayed a long-planned 6 percent reduction in oil output because it has yet to learn how big a production cut Norway is ready to make, a cartel official said Dec. 6.
Although Russia agreed Dec. 5 to cut its output by 150,000 barrels a day, Norway has became the focus of attention as the Organization of Petroleum Exporting Countries tries to coordinate a cutback in global crude supplies in the hope of shoring up sagging prices. Oil prices have fallen by a third since the September 11 terrorist attacks on the United States.
OPEC expects Norway, the world’s third-largest crude exporter, to match Russia’s cut, said the OPEC official, speaking on condition of anonymity from the group’s headquarters in Vienna, Austria.
If it does, then OPEC will have a big enough commitment from independent crude suppliers outside the cartel to justify triggering the 1.5 million barrel-a-day cut its 11 members agreed on last month, the official said. Mexico and Oman have promised to curtail their production, and Angola has said it wants to cooperate.
“As long as we don’t have the exact figure from Norway, we cannot go ahead and implement the cut,” the OPEC official said. Norway was expected to announce its decision within a few days.
Norway initially pledged 150,000 barrel cut Norway has so far offered broadly to cut output by 100,000-200,000 barrels a day. However, it made that pledge at a time when OPEC was expecting Russia to cut much more than 150,000 barrels.
Russia’s decision to cooperate, to this extent at least, ended a showdown with OPEC that threatened to unleash a potentially devastating price war for crude.
The Russian pledge was “a welcome development,” OPEC secretary-general Ali Rodriguez told the official OPEC news agency.
“We remain optimistic that other producers will follow suit to give strength and purpose to our market stability goals,” he said.
In an unusual act of diplomatic brinksmanship, OPEC insisted last month that non-OPEC producers promise to trim their output by a total of 500,000 barrels a day before it would put its own cuts into effect Jan. 1.
OPEC wants cuts on second quarter, too OPEC is weary of cutting production — by a total of 3.5 million barrels so far this year — only to see outsiders maintain or even boost their output.
Russia’s turnaround appeared to vindicate OPEC’s tough stance. Russia, the world’s No. 2 oil producer, had said for weeks it would cut its daily output of 7.2 million barrels by just 50,000 barrels.
Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London, suggested that Russia might simply be making a virtue out of necessity.
“Russian exports always decrease at this time of year, as seasonal demand increases for their internal market,” he said.
Russia pointedly did not say how long its production cut would last, and that has fed the suspicions of some analysts and OPEC delegates.
OPEC wants independent producers to cut output through the second quarter of next year, when seasonal demand for oil tends to dip as weather warms in the United States and other major import markets. Some countries, Russia in particular, might not want to make such a commitment.
“Any production cuts must be extended for as long as takes, if we are going to be successful in establishing a concrete floor under prices,” Rodriguez warned.
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