The Organization of Petroleum Exporting Countries is planning to cut oil production for the first time in almost two years, threatening to keep energy costs high just as economic growth slows.
Aiming to keep oil prices between US$22 and US$28 a barrel, OPEC will probably decide when it meets in Vienna on Wednesday to reduce quotas by 1.5 million barrels daily, or 5.4 percent of December's output, analysts say.
If they cut that amount, oil will average US$27.20 in the first half of 2001, close to the year-earlier average of US$28.50.
"OPEC is determined to be proactive and avoid a price collapse in the spring," said Ramzy Salman, an adviser to the oil minister of Qatar. "It's not a matter of if there will be a cut, but by how much. The numbers being considered are 1.5 million to 2 million barrels a day."
Oil demand normally declines in the spring after the Northern Hemisphere winter ends.
Higher energy prices have already hurt global economic growth and contributed to this month's surprise interest-rate cut in the US, which consumes a quarter of the world's oil. Slowing US growth and four OPEC output increases in 2000 helped oil prices to decline by a fifth since the end of November, intensifying calls from members for production cutbacks to avoid a further drop.
Divisions within OPEC in the past have prevented the group from acting to prop up prices. Cheating on quotas helped send oil below US$10 a barrel in December 1998. This time, several OPEC states have said there is consensus within the group to cut supply. A reduction would be the first since March 1999.
OPEC President Chekib Khalil told Arab daily El Hayat that he assured US Energy Secretary Bill Richardson that "OPEC was committed to insuring prices would stabilize at around US$25 a barrel and to satisfying demand in all consumer countries."
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