Friday March 12 1:13 PM ET
Oil Chiefs Agree To Cut Production
By MIKE CORDER Associated Press Writer
AMSTERDAM, Netherlands (AP) - Oil ministry representatives from Saudi Arabia, Iran,
Venezuela and Mexico today agreed to cut production by more than 2 million barrels a day in an
attempt to bolster depressed oil prices.
On commodity markets, prices jumped to five-month highs.
The agreement is effective April 1, Saudi Oil Minister Ali Naimi said. The pact was reached
after two days of meetings ahead of a March 23 meeting of OPEC oil ministers in Vienna,
Austria.
After hovering near 12-year lows this winter, oil prices have rebounded in recent days as
traders grew optimistic that some production cutbacks would be announced before the OPEC
meeting.
Today's announcement pushed up contracts for April delivery of light, sweet crude 59 cents to
$14.90 per barrel this morning on the New York Mercantile Exchange - the highest level since
early October. The rally has pushed oil prices up 39 percent from December's 12-year low of
$10.72.
NYMEX oil closed at 14.49, but that is OK. Inventories must be drawn down and OPEC credibility must be re-established.
In London, North Sea Brent Blend crude oil was up 75 cents at $12.95 per barrel in afternoon
dealings at the International Petroleum Exchange, after hitting an intraday high of $13.19. Brent
crude last settled above $13 per barrel in November.
Janelle Matharoo, an analyst with Bankers Trust in London, said the production cutbacks were
at the high end of what analysts had been expecting.
''Any higher than this and I think it would have got into the range of implausible. This is about
the maximum people can stomach,'' Matharoo said.
Further details of the cuts were expected to be released later today.
The issue of Iran's production had been one of the major obstacles to a new agreement on further
output cuts by both the Organization of the Petroleum Exporting Countries and non-OPEC
countries.
Iran has insisted that any cuts be made from a base production level of 3.925 million barrels a
day, while other oil producers claim that figure should actually be 3.623 million barrels a day.
In the past week, consultations between Saudi Arabia and Iran and also between Gulf
Cooperation Council members appear to have broken the stalemate.
dailynews.yahoo.com
Friday March 12 4:58 PM ET
Oil Stocks Greet Cuts Cautiously
By Paul Thomasch
NEW YORK (Reuters) - The oil market cheered Friday the latest effort by major oil producers
to drain a world oil glut, but postponed a full celebration until more details of the historic
agreement become clear.
Crude futures for April delivery broke through $15.00 a barrel for the first time in five months
after top oil producers meeting in The Hague in The Netherlands announced a deal to cut
production by more than two million barrels per day (bpd), about 3 percent of the daily world
output.
But officials held back important details, such as how much each country would cut, and crude
futures quickly forfeited most of their early advances.
April futures ended Friday's session at $14.49 a barrel, up 18 cents, after hitting a high of
$15.11.
''They have an agreement, but the details are unknown, and the market will simply wait for those
specifics,'' said Dr. Joseph Stanislaw, president of Cambridge Energy Research Associates. He
expects prices to rally in coming weeks.
Meanwhile, major oil companies' shares, which had followed oil prices sharply higher in recent
days, were mixed.
The Standard & Poors Oil and Gas Index, which tracks oil prices most closely, rose 0.69 to
49.30, while the broader S&P 500 share index fell about 3.09 points to 1,294.59.
The major international integrated oil companies index, which includes concerns like Exxon
Corp., dropped about 5.09 points to 867.35.
''When you look at the major oil companies, more than half are down today,'' said Frank
Knuettel of PaineWebber. ''There was obviously some disconnect between oil prices and oil
stocks, and that's because investors are extraordinarily skeptical -- not only with this agreement,
but with OPEC historically.''
Almost exactly a year ago, Saudi Arabia and Venezuela, heavyweight members of the
Organization of Petroleum Exporting Countries, teamed with non-OPEC producer Mexico for
talks in Riyadh, Saudi Arabia, which ultimately led to two agreements to cut worldwide supply
by a total of 3.1 million bpd.
The talks rescued oil prices, sending oil futures from below $13 to almost $17 a barrel, but only
temporarily. By December, prices hit a 12-year low of $10.35 as cheating on the agreements
and a sharp rise in exports from Iraq left the market awash in oil.
Though skeptical, oil experts are still giving the latest effort some benefit of the doubt.
''They are making progress, and it's clear that the initial price increase, directionally, was
correct,'' said John Lichtblau, chairman of the Petroleum Industry Research Foundation in New
York.
Amy Jaffe, an OPEC expert with Rice University's Baker Institute, said, ''The market is better
placed to take on cuts than it was a year ago.''
With a new Venezuelan government and better compliance from other OPEC members with the
1998 deal than during most of the 1990s, ''OPEC has also restored some credibility by its
ability to implement at least some of its (previous) cuts,'' she said.
Saudi Arabian Oil Minister Ali al-Naimi, speaking after the special meeting ended Friday, said
he was sure of a high degree of adherence to the agreement, although he didn't rule out that more
cuts may be needed down the road.
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