OPEC rallies behind record oil supply cut
OPEC oil ministers lined up on Tuesday to back what would be the group's biggest ever output cut as crude prices fell further on the wider picture of the damaged world economy, BBC reported.
Saudi Arabia was first to publicly support a reduction of 2 million barrels per day (bpd) ahead of OPEC's meeting on Wednesday. That figure was swiftly endorsed by many of the group that pumps more than a third of the world's oil.
"We are in harmony, we know the situation is difficult. We have to cooperate together. We have to reach a difficult decision, but we're going to reach it. I think 2 million is the most likely cut," said OPEC Secretary-General Abdullah al-Badri.
Ali al-Naimi, Saudi oil minister, told Reuters he also expected those outside OPEC to cut up to 600,000 bpd in concert with the unprecedented reduction expected from the 12-member exporter group.
An overall reduction of 2.6 million bpd would remove about 3 percent of the world's daily output.
"We know that supply is still somewhat in excess of demand, inventories are also higher than normal," Naimi told reporters.
"Therefore to bring things in balance there will be a cut of about 2 million barrels per day at this meeting."
The Organization of the Petroleum Exporting Countries' output restraints of two million bpd already in place have failed to counteract tumbling demand that has pushed the oil price down by more than $100 since July.
And the prospect of recession further eroding worldwide fuel use pushed oil toward $43 a barrel on Tuesday, not far from a four-year low of $40.50 hit early this month.
Naimi's counterparts from Venezuela, Iran and Libya openly endorsed the depth of cut, 7.3 percent of OPEC's supply target, suggested by OPEC's leading producer.
Saudi Arabia has already taken steps to remove excess oil and push prices back toward the $75 level Saudi King Abdullah has identified as "fair".
On his arrival in Oran, Naimi clearly spelled out the kingdom's position.
"Let me tell you this -- this is Saudi Arabia -- since August to November we reduced 1.2 million barrels per day from 9.7 to 8.5," he said.
Reuters reported last week that Saudi Arabia's biggest customers would receive less oil in January -- implying the kingdom had already factored in another OPEC reduction.
Naimi confirmed that.
"In preparation for this meeting, yes," he told Reuters.
Gulf neighbor Kuwait said it, too, was wasting no time in cutting January supplies ahead of Wednesday's expected cut.