Saudi minister backs proposed OPEC cut - Yahoo! News

DOHA, Qatar - Saudi Arabia's oil minister said Thursday that his country supports
OPEC' name=c1> SEARCHNews News Photos Images Web' name=c3> OPEC's proposed 1 million barrels-a-day production cut.
"We will try to make the market balanced," Ali Naimi said, ending two weeks of silence from the world's largest oil-producing nation and giving a quick jolt to oil prices.
Naimi's statement came as the cartel's oil ministers gathered in the capital of Qatar for emergency talks on cutting output after a price decline of more than 25 percent since mid-July.
Saudi backing is considered to be critical among analysts who have doubted two weeks of rumors that there was consensus for an output cut within the often fractious Organization of Petroleum Exporting Countries.
It was still unclear, however, whether the cut will be made to OPEC's official production quota of 28 million barrels a day, or to its actual output, which is believed to be slightly below that level due to slackening demand.
Light sweet crude for November delivery rose 37 cents to $58.02 a barrel in electronic trading on the New York Mercantile Exchange.
Another OPEC official, speaking on condition of anonymity because he wasn't authorized to make announcements on behalf of the organization, said there was still no formal agreement, "especially on the details of such a cut."
Just how the 1 million barrels per day cut will be divvied up is also a contentious issue among OPEC countries that depend heavily on oil revenues. The proposed cut would take effect Nov. 1.
This would be the first time OPEC has trimmed its output since December 2004, when oil traded slightly above $40 a barrel and the cartel lowered its official production quota by 1 million barrels a day.
Michael Fitzpatrick, a New York-based oil broker at Fimat USA, said "I'm not sure that a million barrels is going to be enough" of a cut to keep oil prices from further declines. "It's going to be more effective if it comes from actual production and not the quota," 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."
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 organization'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.
Because several OPEC members, including Nigeria and Venezuela, have not been able to maintain production at the levels they have been allocated, the Saudis and others have had to pick up the slack in recent years (by exceeding their quotas) to meet rising global demand. Over the past few months, though, the Saudis have reined in production by about 400,000 barrels a day due to weakening demand.
Now Saudi Arabia is likely to be pushing other OPEC members to chip in, analysts said, lest it cede further market share at a time of high prices.
Still, Saudi Arabia regularly expresses some discomfort with soaring oil prices — crude futures surpassed $78 in July — in part because of its close relationship with the United States, the world's largest energy consumer. But Riyadh has more pragmatic reasons to worry: high energy prices have caused a surge of investment among non-OPEC oil producers and have ignited worldwide interest in conservation and alternative fuels.
Many analysts believe that Saudi Arabia, and by default the rest of OPEC, is prepared to accept oil prices around the $55-a-barrel level. Whether the group can successfully manage its output to influence this target price is another matter altogether.
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