OPEC Prepares to Cut Oil Production to Prevent Drop in Prices

By Alex Lawler

Vienna, April 24 (<a href=quote.bloomberg.com>Bloomberg) -- OPEC, which pumps a third of the world's oil, has agreed on the need to reduce production to prevent a slide in prices as the war in Iraq ends and demand slows, the group's president said.

Ministers plan to gather at 2 p.m. Vienna time for an informal meeting to discuss the size of their cutbacks, said Abdullah bin Hamad al-Attiyah, Qatar's oil minister and OPEC president. Some members back a reduction of 2 million barrels a day, designed to keep oil around $25 a barrel, he said.

We're very focused on that price and are going to do everything to maintain it,'' Saudi Oil Minister Ali al-Naimi told reporters. He said the Organization of Petroleum Exporting Countries is determined'' to keep prices at $25.

The Organization of Petroleum Exporting Countries meets today in Vienna, after prices dropped from $34 a barrel in March because of easing concern about the war in Iraq. Members from Saudi Arabia to Nigeria opened the taps during the past two weeks to prevent shortages as Iraqi exports stopped, raising concern that too much oil may now be reaching consumers.

OPEC, supplier of a third of the world's oil, this month has pumped 1.7 million barrels a day more than its quota of 24.5 million, according to PetroLogistics Ltd., a Geneva-based industry consultant. Of the total, Saudi Arabia pumped 8.9 million.

``We will agree to reduce the oversupply,'' Venezuelan Energy and Mines Minister Rafael Ramirez told reporters.

Brent crude oil rose as much as 40 cents, or 1.7 percent, to $24.66 a barrel and was up 28 cents as of 12:44 p.m. in London. Prices are down 14 percent so far this year.

Ministers want to keep the oil index they monitor between $22 and $28 a barrel. The benchmark was last at $25.14 a barrel.

Outlook

While the U.S. military has said production may start from Iraq's northern fields next month, resuming exports depends on determining who will sell the oil. Iraq's oil reserves are the second-largest in the world.

Al-Naimi said he's not concerned about new supply coming because the world will soon need all it can get.

We're going to need more than just Nigeria and Venezuela,'' said al-Naimi. There's not going to be enough supply. We will be lucky if in the next 10 years we have enough to meet demand.''

Keeping oil around $25 ``keeps everyone happy'' and will encourage the investment needed to keep new supply coming, the minister said.

The Centre for Global Energy Studies, a consulting company founded by former Saudi oil minister Sheikh Zaki Yamani, said the group needs to trim supply by 500,000 barrels a day from March production to keep prices in the target range this quarter.

Oil consumers, including the International Energy Agency, representing 26 industrialized countries, have urged caution, saying supplies are needed to replenish inventories. Last Updated: April 24, 2003 07:46 EDT