24 Oct 2008

Oil producers set to cut output at emergency meeting

9:44 pm on 24 October 2008

The oil producers' cartel OPEC began an emergency meeting in Vienna on Friday and was expected to cut its oil output in a controversial bid to support plunging crude prices even though recession looms for major economies.

Kuwait's Oil Minister Mohammad al-Olaimoil told reporters that the Organisation of Petroleum Exporting Countries will cut crude output by a "wise" amount so as "not to affect" the world economy.

Global stock markets dived to their lowest levels in years on Friday as fears grew that a financial crisis is taking a heavy toll on corporate earnings.

Analysts expect OPEC, which produces 40% of the world's oil, to cut oil output by at least one million barrels per day, despite deep opposition by Western leaders.

British Prime Minister Gordon Brown said recently that any reduction made in a bid to push up oil prices would be "scandalous" at a time when major world powers, including Britain and the United States, are close to recession.

However ahead of Friday's gathering, Iran - OPEC's second-biggest oil exporter - and Libya both called for a reduction of two million barrels per day, while Venezuela said there should be a cut of at least one million barrels.

OPEC's official output quota stands at 28.8 million barrels per day.

The price of New York oil dived to a 16-month low point on Thursday, as recession fears stoked concerns about falling crude demand, traders said.

New York's main contract, light sweet crude for December delivery, sank as low as $US65.90 per barrel - a level last seen on 13 June, 2007.

Oil prices hit an all-time high of $US147 a barrel in July this year.

The meeting on the impact of the global financial crisis and looming recession on the oil market was originally planned for 18 November but was brought forward as prices plunged.

OPEC comprises Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. A 13th, Indonesia, has suspended membership.

Indonesia officially leaves the cartel at the end of 2008, while Iraq does not have an output quota because of the country's post-war strife.