Here is the article KDRABIK is referring to.
Dave
OPEC Reported in Agreement to Cut Oil Production by 5%
http://www.nytimes.com/2001/01/17/business/17OIL.html
January 17, 2001
By NEELA BANERJEE
VIENNA, Jan. 16 The Organization of the Petroleum Exporting Countries is expected to announce a decision on Wednesday to reduce
production by more than 5 percent in hopes of propping up world oil prices, key officials of the cartel indicated.
OPEC's leaders will convene here to issue a formal decision, but oil ministers from several member nations said that an agreement
had already been reached for the first production cut in two years.
The Saudi Arabian oil minister, Ali al- Naimi, told the Dow Jones news service that OPEC would "probably" cut output targets by 1. 5 million barrels a day to steady the market and avoid a "precipitous fall in the price or a precipitous rise in the price. " The Kuwaiti minister, Saud Nasser al-Sabah, confirmed that plan.
The meeting, OPEC's fourth in six months, is taking place solely because of "the decline in prices," he was quoted as saying, "and
we have to take the decision to rectify the prices. "
On news of the anticipated cut, crude oil for February delivery rose 24 cents a barrel on the New York Mercantile Exchange, to
$30. 29. In part, this subdued market reaction reflected that OPEC leaders had been talking about reducing production for two weeks, after crude oil futures prices fell as much as 30 percent in December.
The economies of the OPEC countries are almost entirely dependent on oil revenue, and the fall in prices rattled these countries,industry analysts said. A few months earlier, OPEC members had thought that $22 to $25 was an attractive price for a barrel of oil on world markets; most now seek $25 to $30 a barrel.
The cutback in production would most likely take effect in February, amid a significant slowing in United States and Asian economies. American officials are particularly concerned that a steep increase in oil prices could push a weakened economy into recession.
For its part, OPEC has argued that a cut in production would prevent a glut in oil and avert further declines in prices resulting from a 3. 6-million-barrel-a-day increase in output by OPEC nations late last year. OPEC has rejected the idea that a production cut now would hurt the economies of importing nations.
Energy Secretary Bill Richardson met over the weekend with OPEC leaders to argue for a measured approach to the fall in oil prices.
"We advocated having no cut at all," Mr. Richardson said on Monday after his meetings, "but we recognized there might be some cut. We advocated that the cut be incremental, so that there would be no
jolt to the market. "
The oil market's full reaction is expected to become evident in
the next few days. Last week, traders said that any cut greater than 1. 5 million barrels would cause a significant rise in oil
prices. Indeed, some price hawks at OPEC, like Kuwait, Iran and Qatar, had called for cuts of two million barrels a day or more.
People close to Mr. Richardson's talks said it appeared that the Americans managed to persuade Saudi Arabia, the leading producer,
to favor a smaller cut, one still acceptable to other members. That decision appears to have led to the consensus to reduce production by 1. 5 million barrels a day.
Industry experts noted that the agreement might actually result in a lesser reduction of a million barrels a day given the
expectation that some OPEC nations eager to take advantage of higher prices would exceed their quotas.
OPEC's past efforts to micromanage the oil market have often failed. And even if prices were to hold steady for now, other important factors could drive them higher as the planned cuts in output take effect.
For instance, if European countries or the United States experienced severe snaps of cold weather in February or March, the
demand for heating oil would be expected to jump and to drive up prices. And Iraq, ever unpredictable, has from time to time taken
its oil exports off the market. More such surprises, as other cartel members reduce their output, could push the futures price of
oil sharply higher once again.