OPEC agrees output cut of 2.2 million bpd

Algerian Energy Mines Minister and current rotating president of the Organization of Petroleum Exporting Countries (OPEC), Chakib Khelil speaks at a press conference held after the end of the meeting of the Organization of Petroleum Exporting Countries (OPEC) at a hotel in Oran, Algeria, Dec. 17, 2008. OPEC announced after its 151th extraordinary ministerial conference here that it will slash its official oil output quota by 2.2 million barrels per day (bpd) from Jan. 1 next year. (Chinese media Photo)
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by Ma Wenbo, Li Weijie

ORAN, Algeria, Dec. 17 (Chinese media) -- The Organization

of Petroleum Exporting Countries (OPEC) Wednesday announced an oil output cut of

2.2 million barrels per day (bpd) from Jan. 1 next year, the deepest-ever

reduction prompted by tumbling prices and flagging market.

In light of observing "crude volumes entering the

market remain well in excess of actual demand," the cartel "agreed to cut 4.2

million bpd from the actual September 2008 OPEC-11 production of 29.045 million

bpd, effective from Jan. 1, 2009," said Chakib Khelil, the current OPEC rotating

president.

In addition to the previous cut of 2 million bpd in

September and October, OPEC's total output cut in 2008 would be 4.2 million bpd.

The historic decision was made after consultations

among all 13oil ministers of the cartel during an extraordinary ministerial

meeting in western Algerian coastal city of Oran.

During the one-day meeting, OPEC members also reached

consensus on the distribution of the overall output cut among them. The OPEC

members strongly emphasized their firm commitment to ensuring that their

production is reduced by the individually agreed amounts, Khelil said.

　　CUTTING OUTPUT TO RESCUE OIL PRICES

The slash of oil production is aimed to address the

slumping oil prices, which have shrunk more than two thirds from record mid-July

peak above 147 U.S. dollars.

The Paris-based International Energy Agency said in a

recent report that global oil demand will shrink this year to 85.8 million

barrels a day for the first time since 1983. It predicted that the demand in

2009 would increase by merely 0.5 percent to 86.3 million barrels a day.

"The impact of the grave global economic downturn has

led to a destruction of demand, resulting in unprecedented downward pressure

being exerted on prices," said Khelil, who is also Algeria's energy minister.

"Prices could fall to levels which would place at

jeopardy the investments required to guarantee adequate energy supplies in the

medium to long term," he added.

Since September, the oil cartel had made two

coordinated cuts to shore up the plunging prices. A modest cut of 520,000 bpd

was made on Sept. 10 and then a 1.5-million one was announced on Oct. 24 in its

Vienna meeting.

Yet investors brushed off the two moves as the global

economic slowdown worsened, which has ravaged demand for energy. After hitting

40.50 dollars a barrel on Dec. 5, the lowest in four years, the crude continued

to be traded at lows so far this month, sparking panic among the cartel's

members about their slumping revenues.

Saudi Arabia, the world's biggest oil exporter, has

said the oil prices at 75 dollars are fair.

NON-OPEC COUNTRIES ASKED TO COORDINATE

EFFORTS

As delegations from non-OPEC countries of Russia,

Oman, Azerbaijan and Syria also attended the Oran meeting as observers, the oil

bloc appealed for coordinated efforts to reduce output from non-OPEC members.

"We renew our call on the non-OPEC producers and

exporters to cooperate with the Organization to support oil market

stabilization," Khelil said.

Russian Vice Prime Minister Igor Sechin said at the

meeting that Russia will reduce its oil supply next year if the prices remain

hovering at lows in the world market. "Russia is considering reducing the supply

volume by 16 million tons next year, which equals to 320,000 barrels per day."

Sechin, however, did not express Russia's willingness

to join the oil bloc.

The largest non-OPEC exporter has said last week

Russia is ready to join hands with OPEC to rein in the plunging prices and could

even become part of the oil cartel if membership were in Moscow's interests.

The next OPEC ordinary meeting will be held on March

15, 2009 in Vienna, the oil bloc's headquarters.

OPEC comprises Algeria, Angola, Ecuador, Indonesia,

Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab

Emirates and Venezuela.

The production cut decision involves only 11 nations,

known as the OPEC-11, as Indonesia, which has suspended membership, would

officially leave the cartel at the end of 2008 and Iraq is not subject to the

quota system due to chaos in the country.