Saudi Arabia could cut production in February below Opec target

London/Dubai: Top exporter Saudi Arabia plans to cut oil output by up to 300,000 barrels per day (bpd) below its agreed Opec target - a proactive step to prop up a collapsing market, industry sources said on Sunday.

The most influential member of the Organisation of the Petroleum Exporting Countries (Opec) has lowered supply this month to eight million bpd, meeting its target under Opec's pact to reduce overall production by a record amount from January 1.

But strict Saudi discipline has failed to boost oil prices - which at close to $40 are far from the $75 a barrel named by Saudi King Abdullah as a fair price. So Riyadh is prepared, from February, to go beyond what is required by Opec, the sources said.

"We've been told Saudi Arabia will cut to about 7.7 million in February," said a senior oil executive. "They want to prevent a huge stock build-up and a further decline in the oil price."

The country had increased production unilaterally to about 9.7 million bpd in August last year to calm an oil market that had shot to a record of nearly $150 in July.

But by February, it will have reduced its supply to world markets by a fifth as recession steadily erodes demand for fuel. Refiners in Asia were expecting to receive the lowest Saudi crude shipments in five years and buyers in Europe and the US also were set for substantial cuts.

Some trade sources said the reduced volumes were as much as they needed.

Saudi officials could not be reached for comment.

Sources said it was too soon to tell whether Saudi Arabia was again anticipating wider action by Opec or whether it was acting alone. Opec, which pumps nearly a third of the world's oil, is scheduled to meet again in March.

The fall in demand because of a slower world economy is likely to be exaggerated by then - at the start of the second quarter - when consumption weakens after the northern winter.

Saudi policymakers hope prompt action will lessen the impact of a big increase in inventories as energy use contracts.