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OPEC oil cuts reverse falling prices

Posted on: Monday, 26 January 2009, 08:49 CST

Saudi Arabia's oil minister Ali al-Naimi said the world's largest oil exporter would reduce production beyond its quota agreement to prop up prices.

Analysts expect the Saudis to cut production by 300,000 barrels per day below the reduction it agreed to as a member of the Organization of Petroleum Exporting Countries, The New York Times reported Monday.

OPEC production cuts appear to be influencing prices. After oil reached $147 per barrel in July, prices plummeted through the late summer and fall as the U.S. and European economies faltered and demand slowed.

Prices fell to $32 per barrel in December, but appear to be stabilizing lately, hovering between $35 and $45 per barrel.

In September, OPEC members agreed to trim production by 4.2 million barrels per day. Saudi Arabia, the largest producer, cut its daily production by approximately 2 million barrels.

Compliance has been extremely high, said Kevin Norrish, at Barclays Capital. Most OPEC countries have done most of what they'd pledged to do.

In balance, OPEC is wary of pushing prices to a level that would slow or reverse an economic recovery.

We are working hard to bring the market in balance, Naimi said.

Source: United Press International

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