OPEC will cut output this week because the market faces a glut, but will reverse the measure if shortages emerge in the future, the oil minister of the cartel's most powerful member, Saudi Arabia, said Tuesday.
Ali al-Nuaimi said that the production cutback of around 1.5 million barrels a day would be effective from February 1, and dismissed fears that it could lead to renewed shortages of crude on the market.
"We think the market is oversupplied," al-Nuaimi told a small group of journalists accompanying him on an early morning jog around Vienna. "That is why we need this reduction."
The 11-nation Organization of Petroleum Exporting Countries wants to cut output to underpin the price of crude, which tumbled sharply in December. In London, Brent futures have traded between $24 and $26 a barrel in January, from $35 last October.
Asked whether fitful exports from Iraq could result in a dangerous drain of crude from the market, al-Nuaimi said: "We do not know what they (Iraq) are going to do.
"But if there is a shortage, we will make it good."
Iraqi exports slumped to little more than one million barrels a day in December -- less than half their usual level -- amid a row with the United Nations over the oil-for-food programme.
Oil-consuming countries ranging from Japan to Europe and the United States fear that an OPEC output cut in addition to the Iraqi situation could once again starve markets of crude and result in another price spiral.
The Saudi oil minister admitted that the reduction move, likely to be rubber-stamped at an OPEC meeting of oil ministers on Wednesday, would not make the best inauguration present for George W. Bush, who is to be sworn in as US president later in the week.
"But Bush is an oil man," he added. "He will understand." Al-Nuaimi, one of OPEC's key players as the oil minister of the world's largest oil producer, has insisted that the cartel was keen to secure price stability.
"We are here to steady the market," he said on arriving here late Monday. "We want the market to be in a stable mode. Therefore we need to take a reduction."
"Hopefully we will avoid a precipitous fall in the price or a precipitous rise in the price and that is what we are really trying to do," al-Nauimi said.
He said some countries still wanted a production cut of more than two million barrels per day, "though not all in one go."
Asked Tuesday whether this meant OPEC could cut output further at another meeting pencilled in for March, he would not be drawn. "I could anticipate another cut before March but I could also anticipate another increase," he said.—AFP.
©--Agence France Presse.
© 2001 Mena Report (www.menareport.com)