Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) decided on October 24 in Vienna to cut their total production by 1.5 million barrels per day, in reaction to falling prices and slowing demand. “There is an oversupply, and the stocks are very high,” said OPEC President and Algerian Energy Minister Chakib Khelil, explaining the decision. Benchmark light sweet crude oil fell by more than USD three dollars per barrel (159 litres) on the news, to USD 64.72. The decrease from the cartel’s current quota of 28.8 million barrels per day, would take effect at the start of November, OPEC said in a statement. Khelil denied that the cartel’s move would have any impact on inflation or global economic growth. “Growth has disappeared already in the US, has disappeared in Europe,” he said. OPEC, which produces around 40 percent of global oil output, has seen its basket price hover below USD 70 per barrel since mid-October, down from its July high of USD 140.73. In its latest forecast, OPEC estimated that oil consumption in North America would be 1.2 percent lower in 2009 than this year. At the same time, US reserves have recently grown more than expected. The current economic crisis “has nothing to do with oil, I assure you,” OPEC Secretary General Abdullah al-Badri told reporters. “We would like to have a reasonable income,” he said. The cartel is scheduled to meet next in Oran, Algeria on December 17. But Khelil said the ministers might meet again before that if “it was warranted.” In September, the 11 cartel members subject to the output quota produced an average 29.1 million barrels per day, around 270,000 barrels per day above the agreed limit. “Demand is significantly less than what is being supplied, that is the reason the cut was taken,” Saudi Arabian Oil Minister Ali al-Naimi said after the meeting. Saudi Arabia, the group’s largest producer, will reduce its output target by 466,000 barrels a day. Iran, the second-biggest, will cut 199,000 barrels, OPEC said in a statement. Kuwait’s share of the reduction will be 132,000 barrels, the United Arab Emirates 134,000 barrels and Venezuela 129,000 barrels. Al-Naimi said there was no need for a further cut yet. Conversely, should prices rally again, OPEC would consider raising production, the Saudi minister said. Saudi’s al-Naimi rejected a suggestion put forward by Venezuela that the group re-establish a target price range. OPEC nations use different price assumptions in their government budgets and the group abandoned a range of USD 22 to USD 28 a barrel several years ago. A factor behind the lower oil prices last week was that crude stocks in the United States were rising more than expected last week, analysts said. In addition, US oil product supplies to households fell by 8.5 percent two weeks ago, compared with the same period last year, according to the US Energy Information Administration. OPEC calculates an average basket price based on 13 important brands produced by its members. Indonesia and Iraq are included in the basket, but not in the production quota.

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