OPEC readies knife for oil output cuts -

OPEC ministers say they are ready to finalise an output cut of one million barrels per day, the first since 2004, to halt a precipitous fall in prices and send a message of intent to a sceptical world market.
"The credibility of OPEC is at stake," Algerian Energy and Mines Minister Chakib Khelil told Reuters in an interview.
Ministers are aware their failure to speak with one voice in the two weeks leading up to the hastily convened talks has contributed to oil's slide to $US58 a barrel, 26 per cent off its mid-July peak and near its lowest level this year.
The silence in public of OPEC's most influential member, leading exporter Saudi Arabia, had led some analysts and investors to speculate the kingdom opposed a plan to cut one million barrels per day, or 3.6 per cent, of group output.
Saudi Oil Minister Ali Al-Naimi laid those doubts to rest when he arrived in Doha on Thursday, saying he stood fully behind the planned reduction and suggesting a further cut of 500,000 bpd could follow when OPEC meets in Nigeria in December.
"For now we believe a million barrels from actual production will be meaningful and we have plenty of time to discuss additional cuts when we meet in Abuja," Naimi told Reuters TV.
He later told Reuters: "This is not the end of the road because we have another meeting coming up," Asked how much more OPEC could cut, he said: "Probably another 500,000 bpd."
Fearing a prolonged price slump, OPEC is trying to address high fuel stocks, particularly in the United States, and a projected drop in demand for the exporter group's oil next year as new supplies start flowing, mainly in the Caspian.
"OPEC sees itself being challenged by financial speculators and will respond aggressively to make clear to the market its price objectives and willingness to cut volumes to achieve these objectives," said Gary Ross, CEO at PIRA Energy consultancy.
"Everybody looks to be on board and it looks as if they will cut again if necessary because they mean business."
When ministers sit down to talk at around 1930 GMT they need to determine precisely where to apply the knife - to actual output, averaged over 3, 12 or 14 months, or nominal quotas.
Most in OPEC, which pumps over a third of the world's oil, say a reduction must come from real output to be credible, effectively scrubbing out OPEC's quotas that have little relation to barrels pumped.
"Basically 1 million is going to come off and this is from actual production," Naimi said.
"Whether it is the average of the last 12 months or August we just want to see who wants what."
Previously Iran and Venezuela, struggling to meet their quotas, had been wary of a cut based on actual supply that would see them ceding market share to other producers, notably Algeria, that are pumping far above their official limits.
Iranian Oil Minister Kazem Vaziri-Hamaneh said on Thursday he would go along with the majority view.
Some members argue a reduction of more than 1 million bpd is needed to put a floor under prices. OPEC President Edmund Daukoru said a 1 million bpd cut would be the "minimum outcome" of Thursday's meeting.
"We will be selling ourselves short unless we reach an agreement and issue a clear and credible statement at the end," he told Reuters. "Market conditions dictated we had to meet."
Algeria's Khelil said a $US50-$US60 price range for OPEC's basket of crudes, last valued at $US55.27 a barrel, would be acceptable to oil producers and consumers. That would put US crude between $US55-$US65 - three times its price in January 2002.
To sidestep the sensitive issue of quotas OPEC may present the cuts as voluntary or temporary. The organization will publish only a list of individual cutbacks, ministers said. That may not be enough to satisfy sceptical investors, however.
"OPEC's task in Doha looks difficult. The group must provide the market with a credible scheme or prices may fall further," ABN AMRO analyst Geoff Pyne said.
Now is a delicate time for OPEC to rein in production with oil prices still at relatively high levels and consumer nations worried about the impact on their economies.
Strong demand from the US and China sparked a 4-1/2 year rally that only stalled in recent months. Real or feared supply disruptions in Iraq, Iran and Nigeria added fuel.
OPEC's official ceiling has been at 28 million bpd since July 2005. During that time output has shifted around 500,000 bpd either side of the official limit.