OPEC cuts to oil production to start in Nov.

[Bud Bud]

Here it is, OPEC's answer to the falling world price of oil, just in time for Christmas. They have decided to cut prodution by another 200,000 more than they originally thought and with another possible cut of 500,000 in Dec.

23/10/2006 - The oil cartel OPEC has decided to cut production by 1.2 million barrels a day, the United Arab Emirates' oil minister said on Friday.

Mohammed bin Dhaen al-Hamili made the announcement at a news conference after OPEC's oil ministers held an emergency meeting in the capital Qatar.

The output cut is aimed at boosting prices, which have declined more than 25 per cent since mid-July, and is to take effect from November 1.

He did not specify the amount of production that each member country would cut, but said the reductions will affect all countries.

The cuts will come from actual production levels, he said.

The cuts are the first time OPEC has trimmed its output since December 2004, when oil traded slightly above US$40 a barrel and the cartel lowered its official production quota by one million barrels a day.

However, many observers expect further production cuts in the near future.

Michael Fitzpatrick, a New York-based oil broker at Fimat USA, doubted whether the cut would have the desired effect.

"I'm not sure that a million barrels is going to be enough" of a cut to keep oil prices from further declines, he said.

Qatar's Energy Minister Abdullah bin Hamid Al-Attiyah said the cartel's members are not excluding making further cuts.

Asked whether another cut could come in December, he said, "Everything is possible. We are working with the market and it is an open market."

Al-Hamili echoed the possibility, saying "We will monitor the market and review the situation and take a decision accordingly."

OPEC is scheduled to meet again in December in Nigeria and many analysts believe a further cut could be implemented then. "They better act quickly and decisively," Fitzpatrick said.

The organisation's president, Edmund Daukoru of Nigeria, said talk of the possible need of a further 500,000-barrel cut was "in line with my own thinking," Dow Jones Newswires reported.

OPEC price hawks such as Nigeria and Venezuela have strongly advocated a cartel-wide production cut since the start of the month.

But without public support from Saudi Arabia, the market took with a grain of salt the likelihood of any cuts.

Source: AAP NewsWire