OPEC plans to cut production next year

CAIRO, Egypt — OPEC will cut back on oil production early next year in a bid to stave off a further decline in the world price, Kuwait’s oil minister said Thursday.

The comments by Sheikh Ahmad Fahad Al-Ahmad Al Sabah revealed what delegates to the Organization of Petroleum Exporting Countries had agreed in informal discussions ahead of their formal meeting on Friday.

Asked when the cut in production would start, Al Sabah said: “Everyone has committed for next month, maybe to start from February.”

He said all members of the 11-nation organization were committed to fully complying with the current production ceiling of 27 million barrels a day and taking excess oil off the market.

Al Sabah estimated OPEC is producing around 1.7 million barrels a day total above production quotas, though others estimate it at about 1.1 million.

Al Sabah spoke following a meeting of representatives of Kuwait, Saudi Arabia, the United Arab Emirates and Qatar.

The full OPEC meeting on Friday is expected to set production policy for the coming months.

Earlier Thursday, oil ministers held out the possibility that if crude prices continue to fall, OPEC could reconsider its production target early next year and lower it. Some OPEC members had wanted a commitment to lower quotas immediately, but Ali Naimi, the oil minister of powerhouse Saudi Arabia, suggested those trial balloons had burst.

“It is too early to jump on that basis,” Naimi told reporters.

OPEC’s production total reaches more than 30 million barrels a day once Iraq is included. Iraq, which produces about 2 million barrels a day, has been exempted from quotas to enable it to rebuild its economy.

Benchmark U.S. crude futures have fallen by almost a quarter since the record prices of more than $55 a barrel in late October. The decline has been sharpest in the last week or so, spurred by increases in U.S. petroleum inventories, mild winter weather, and little sign of a slowdown in OPEC output.

“I think the price decline was expected, but the speed of the decline was a surprise,” the oil minister of the United Arab Emirates, Mohammed bin Dhaen al-Hamili, told reporters.

He said the first step should be to tackle the production that exceeds the quota target.

Earlier, Kuwait’s Al Sabah had said he was in favor of enforcing compliance with quotas before reducing the target.

“I think, we can cut all overproduction (now), and then think about (reducing) 500,000 barrels a day from the official ceiling,” Al Sabah said earlier Thursday.

OPEC is due to meet in Iran in March.

There was no immediate word on whether OPEC also was preparing to up its price band for crude Friday in another move to prevent a further slide in prices.

Crude is now valued at nearly double the bottom end of the present band of $22 to $28, and several ministers said they wanted that span hiked significantly.

The Emirates’ Al-Hamili said the new range should be between $33 to $38 because of the weak dollar and the realities of more expensive crude.

Officials from Iran and Venezuela — OPEC’s No. 2 and No. 3 producers — have also said they would like to see the low end of OPEC’s preferred price range at about $30 a barrel.

Libya’s Oil Minister Fathi bin Shatwan said colleagues endorse the need to defend the group’s reference price at $35 a barrel.

Sentiment within OPEC to cut production has grown over past weeks as the price of crude beat a retreat.