Saudis to cut output below Opec pact

Riyadh: Saudi Arabia, the world's top oil exporter, will cut production by 300,000 barrels a day below the quota agreed on with Opec to prop up prices, Algerian Oil Minister Chakib Khalil said.

Saudi Arabia will make the reduction before a March 15 meeting of the Organisation of Petroleum Exporting Countries (Opec), the Algerian state-run newspaper Al Moudjahid reported, citing comments from Khalil yesterday in Algiers.

"That shows that the Saudi [wants] to take their responsibility and that they see the imperative to match a lower demand with a lower supply," Johannes Benigni, managing director of JBC Energy consultants in Vienna, said in a Bloomberg Television interview yesterday.

Saudi Oil Minister Ali Al Nuaimi said last week his country was producing about 8 million barrels of crude a day and would trim output next month below its agreed OPEC quota of 8.051 million barrels a day. He didn't give a precise forecast.

New production targets for Opec members came into effect January 1 following a December 17 meeting in Oran, Algeria. The 12-member group needs to make the deepest supply cuts in its history to comply with the revised quotas.

The 11 Opec nations subject to output limits pumped a combined average of 27.45 million barrels a day last month, according to Bloomberg estimates. That's 2.6 million barrels more than the 24.845 million-barrel-a-day ceiling. Iraq is exempt from quotas.

"The cuts agreed are being implemented 100 per cent," Khalil said. "That's why we're seeing prices levelling off, not weakening further."

Crude traded in New York has lost more than two-thirds of its value since rising to a record $147.27 (Dh540.99) a barrel in July as a global economic slump erodes demand. Oil futures were trading at $44.42 a barrel at 8.56 am London time yesterday, up two per cent. They touched a five-year intraday low of $32.70 three days ago.

Kuwait Petroleum Corp announced yesterday it has told customers exports will be lower, to match the nation's Opec quota for January.

Global oil demand will probably fall through the third quarter of this year before having any chance of rebounding, UBS Investment Research said in a report yesterday.

"Only at the end of 2009 do we expect a little growth," said Jan Stuart, a New York-based economist for UBS. A fourth-quarter increase would compare with "unprecedented, steep contractions" in the same quarter of last year, Stuart said.