OPEC to cut oil output
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January 16, 2001: 3:02 p.m. ET
Saudi minister says members decided on cut of 1.5M barrels; crude price dips
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NEW YORK (CNNfn) - Saudi Arabian Oil Minister Ali al-Naimi announced on Tuesday that OPEC members agreed to cut production of crude oil by 1.5 million barrels per day.
Naimi said that OPEC, or the Organization of Petroleum Exporting Countries, was "100 percent" behind a reduction of that volume.
OPEC ministers are due to meet Wednesday to confirm the agreement to rein in output to prevent a drop in oil prices during the declining seasonal demand in the second quarter.
Oil prices slid Tuesday in anticipation of the OPEC cartel going ahead with its intention to reduce output this week. OPEC pumps around 40 percent of the world's crude supply.
Brent crude futures for March delivery slipped 19 cents to $25.87 on London's International Petroleum Exchange Tuesday.
Cartel kingpin Saudi Arabia expects OPEC to curb output by 5 percent when ministers meet on Wednesday in Vienna.
"We saw the supply-demand data and we decided we had to make a reduction. Had we carried on with output at this [current] level we would have flooded the market," Naimi said.
OPEC seemed certain to dismiss calls from the U.S. and European Union to make only modest cutbacks. The western powers fear a surge in energy prices, which could destabilize fragile economies.
U.S. Energy Secretary Bill Richardson finished a six-nation tour of OPEC member nations Monday, but said he had not received any commitment about the size of an expected oil production cut.
Others members of OPEC, such as Venezuela, Algeria, Indonesia and Qatar, have called for an even larger reduction of up to two million bpd.
OPEC members want to stabilize world oil prices around $25 a barrel, and want to avoid prices to hit lows of $9.95 a barrel, as they did in 1998 during the Asian financial crisis. A year earlier, OPEC had raised output to meet demand from booming economies in the region.
Crude prices have been extremely volatile in the past two years, with Brent jumping as high as $34.
OPEC Secretary General Ali Rodriguez-Araque has said: "All figures indicate that there has been oversupply of crude over the past few months and stocks at the level of the consumer has risen sharply."
Brent had slumped $12 from a 10-year high of $35 in October after last year's series of OPEC increases helped replenish lean inventories.
--from staff and wire reports
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