Oil cut pact signed by OPEC........{YAWN}
Jeff
OPEC Ministers Sign Agreement to Cut Oil Production by 1.7 Mln Barrels/Day
OPEC Signs Agreement to Oil Output to End World Glut (Update2)
(Adds trader comment in 4th paragraph, updates prices.)
Vienna, March 23 (Bloomberg) -- The world's biggest oil
exporters, as expected, agreed to cut daily world output by 2.7
percent in a bid to end a glut that in December sent prices
tumbling to a 12-year low.
The Organization of Petroleum Exporting Countries, which
pumps two-fifths of world oil supply, signed a plan to idle 1.72
million barrels of daily output, said Ali Naimi, oil minister
for Saudi Arabia. Mexico, Oman, Russia and Norway will add
another 388,000 barrels of daily cutbacks, bringing the total to
more than 2.1 million barrels.
Exporters have lost billions from low oil prices and have
seen their economies weaken, forcing OPEC to end their disputes
and agree to cut output for a third time in the past year. Oil
prices have gained about 40 percent in the past three months as
traders expected OPEC would act, though doubts remained that the
group would keep its promises.
''These are good intentions, but the market needs more than
good intentions,'' said Fala Aljibury, an independent oil
analyst. ''The market is going to be watching.''
Benchmark Brent crude oil for May delivery fell as much as
26 cents to $13.62 a barrel in afternoon trading on the
International Petroleum Exchange in London, after the agreement
was signed. London oil futures in December touched $9.55 a
barrel, a record low.
Revenue
Even though prices have risen they remain shy of OPEC's
goals. Saudi Arabia and other OPEC members expect that the new
cuts will raise the price of benchmark Brent crude oil to $17-
$19 a barrel, and West Texas Intermediate to $18-$20 a barrel,
by the third quarter. Oil in New York, which specifies WTI
crude, fetches about $15.50 a barrel.
The cuts begin April 1 and are to last for a year. Several
nations, including Saudi Arabia, have already told customers
they will receive less oil in the months ahead.
Exporters last year idled 3.2 million barrels of daily
output in a failed attempt at lifting prices. As producers
exceeded their production quotas and demand slowed from Asia and
other regions, OPEC revenue fell 36 percent last year to $104
billion, barely a third the 1980 peak of $283 billion, according
to a study by Arthur Andersen.
Ministers insisted that this round of cuts would be the
group's last and succeed in relieving bulging supplies.
''They will work,'' Naimi said of the cuts.
OPEC members aim to attain the latest quotas by May 31,
just two months after they take effect. The unified effort and
lack of public bickering ahead of this meeting could signal the
group will finally achieve its goal of a stable oil price.
Idle Output
OPEC after the cuts are made will have about 21 percent of
its capacity sitting idle, signaling the potential for increased
production should prices rise, according to the Centre for
Global Energy Studies, a London-based consulting firm founded by
former Saudi Arabian oil minister Sheikh Zaki Yamani.
That fact leaves analysts skeptical that exporters will
adhere to these latest quotas, which were reached during a
series of meetings earlier this month. In February, OPEC made
only 79 percent of its promised cuts, according to a Bloomberg
survey.
''I can see the barrels creeping back into the market,''
said Lalita Gupta, an oil analyst at Deutsche Securities. ''OPEC
cheats.''
Unlike at past OPEC meetings, the 11-nation group's policy
had largely been negotiated in advance, a sign of a new level of
cooperation in OPEC.
''I am very happy to see a new spirit in OPEC,'' said
Algeria Oil Minister Youcef Yousfi, who also is the group's
president, before the agreement was signed.
Yet successful adoption of the plan appears more likely now
that Venezuela -- a longtime cheater of its quotas -- has a new
government and that a sticking point over Iranian compliance to
past accords has been resolved, analysts said.
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