opec to cut

OPEC expected to announce cuts
POSTED: 0038 GMT (0838 HKT), October 8, 2006

DUBAI (Reuters) -- OPEC is expected to make formal on Monday a deal to remove 1 million barrels a day of crude from oversupplied markets, an OPEC source said, as ministers lined up to support the cut.

Iran, OPEC's second biggest producer, and Algeria on Sunday publicly backed the reduction, OPEC's first since April 2004. The plan was made public on Thursday by a senior OPEC delegate.

"I think there is more or less consensus for 1 million bpd," OPEC President Edmund Daukoru told Reuters by telephone on Sunday.

"The reference point is the (official) 28 million bpd ceiling."

An OPEC source said Daukoru had written to oil ministers in the last two days seeking their backing for the supply curbs.

"It is expected that there will be a decision on Monday to cut one million barrels per day from the official ceiling after consultations between the ministers," the source told Reuters.

Algerian Energy and Mines Minister Chakib Khelil said there was consensus to lower output. This would have a positive impact on the market, he added.

July peak above $78
Oil fell below $60 a barrel on Friday as investors doubted OPEC's resolve to cut, in the absence of an official statement from the organization that pumps over a third of the world's oil. U.S. crude settled at $59.76, off nearly $20 from a mid-July peak of $78.40.

The OPEC president, along with Iran, said the 11-member group would make the cuts from an official 28 million bpd ceiling -- a move that could lead to tricky negotiations over a realignment of OPEC quotas.

OPEC's next scheduled meeting is on December 14, but some members want to hold an emergency session this month to formalize the cut.

"What is important is that the market finds the OPEC position credible. That is why it is necessary to have a meeting to make a decision on the cut and to act on it," Khelil said.

He said OPEC members were still discussing the possibility of an October 18-19 gathering, an idea he said was supported by Algeria, Saudi Arabia, Libya and Venezuela.

Daukoru said he was not in favor of an emergency meeting. He said OPEC countries could implement cuts next time they set their monthly sales volumes to their customers.

Nigeria and Venezuela announced unilateral reductions just over a week ago.

A senior OPEC delegate said on Thursday that leading oil exporter Saudi Arabia would shoulder the biggest part of the burden as OPEC moves to address a 23 percent drop in prices since July 14 and brimming fuel stocks around the world.

The delegate said nine states would take part in the curbs and cut their "fair share" from overall output. OPEC pumped 29.47 million bpd in September, according to a Reuters survey.

Khelil said Algeria would reduce production, but did not say by how much. Iran said it would support an OPEC cut but that the group was still discussing the size of any reduction.

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