opec cut details

OPEC slashing production by 1M barrels a day
Prompted by supply surge, cuts will go into effect as soon as possible; price spikes on news.
October 5 2006: 8:29 AM EDT


DUBAI (Reuters) -- OPEC will cut oil supply by 1 million barrels per day (bpd) as soon as possible, with top world exporter Saudi Arabia reducing its production by 300,000 bpd from September, a senior OPEC delegate said Thursday.

U.S. crude oil prices climbed $1.34 to $60.75 a barrel on the news, rebounding from Wednesday's eight-month low of $57.75 a barrel.


This will be OPEC's first output cut since April 2004. Its official ceiling has been 28 million bpd for more than a year.

All OPEC countries apart from Iraq, exempt from OPEC quotas, and Indonesia, a net importer, are to take part in the supply curbs.

"The goal now is to cut actual oil production by 1 million barrels daily as soon as possible but the exact date is still being worked out," the delegate said.

The delegate added the Organization of the Petroleum Exporting Countries was concerned by the high level of global fuel stockpiles more than the price of oil, which has fallen by about 25 percent from its mid-July peak.

The Financial Times, which reported the production cut late Wednesday evening, quoted one OPEC official as saying that the oil cartel was going to try to keep the price of oil above $50 to $55 a barrel.

The price of crude has fallen nearly $20 or 25 percent since mid-July when oil hit a record high of $78.40 barrel.

The cut will drop Saudi Arabia's production to 8.8 million bpd from about 9.1 million last month, the delegate said.

The Financial Times also reported Saudi Arabia had already quietly cut production by about 200,000 bpd over the past two months.

OPEC members Nigeria and Venezuela unilaterally decided to cut production last week, taking 170,000 bpd of crude off the market