VIENNA, Sept 24 - OPEC oil producers on Wednesday agreed a surprise cut in supplies to defend high crude prices despite the approach of peak winter demand. Ministers decided to remove 900,000 a barrels per day from supply limits for 10 members, excluding Iraq, to 24.5 million bpd, said Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah. "OPEC will cut by 900,000 bpd from November 1," al-Sabah told news agencies after a closed ministerial session. The decision, expected to be ratified at a 1400 GMT meeting, looks set to raise energy costs for oil importing nations during the northern hemisphere winter.
U.S. light crude futures quickly jumped a dollar a barrel and at 1200 GMT stood up 89 cents at $27.99 a barrel. "I think it is very bullish for oil prices," said Gary Ross of New York consultancy PIRA Energy. "The hedge funds are short and they will be running for cover. It shows that OPEC cares more about revenue and price than anything else." "If oil prices continue to move higher, then interest rates in the G7 may need to be higher than they would otherwise be which is not good for recovery prospects," said Paul Robson, international economist at Bank One Corp. The Organisation of the Petroleum Exporting Countries had seen world oil prices ease this month to four-month lows, despite a sluggish recovery in post-war Iraqi output. It aims to keep prices in a $22-$28 band for a basket of cartel crudes. Going into Wednesday's meeting many ministers had said they saw no reason for a change in output.
The recent price fall and projections that increasing volumes from rival non-OPEC suppliers like Russia were outweighing demand growth appeared to change ministers' minds. Delegates said they were worried about a counter-seasonal crude stockbuild during the fourth quarter. Projections for 2004 from the International Energy Agency, adviser on energy to 26 industrialised nations, are for 1.4 million bpd of extra non-OPEC supply and only 1.1 million bpd of demand growth on the 79 million bpd world market. Iraq, attending its first OPEC meeting since U.S. occupation, reassured fellow members that Washington's influence would not prevent it staying in the cartel.
"Iraq will remain in OPEC as a full member," Iraq's new oil minister Ibrahim Bahr al-Uloum told a news conference. He said Baghdad would welcome foreign oil company investment. U.S. companies are expected to play a lead role in exploiting Iraq's vast reserves. "We welcome all foreign oil companies," Uloum said. "Foreign investment in the upstream is a good idea." Ministers also agreed to meet again on December 4 to review policy for the first quarter. They postponed a discussion on the election of a new secretary-general until that meeting.//