24 October 2006, 11:22  Oil prices weaker in Asian trade on doubt about OPEC cuts

Oil prices were weaker in Asian trading hours in view of the buoyancy of US reserves of crude and doubts about OPEC's ability to carry out the production cut its has announced, analysts said. At 12.05 pm here (0405 GMT), the New York Mercantile Exchange's main contract, light sweet crude for December delivery, was down 0.01 usd at 58.80 usd a barrel from its close of 58.81 usd in the US overnight. Brent North Sea crude for December had fallen 0.11 usd to 59.10 usd. While OPEC has announced that it will cut output by 1.2 mln barrels per day (bpd) in a bid to halt the slide in prices, only Saudi Arabia has yet given a precise commitment to slash production -- by 330,000 bpd. Analysts said other important members of the 11-member cartel such as Nigeria and Venezuela, which are already producing below their required quotas, had yet to announce the volume of their output cuts, raising doubts in the market about whether OPEC is united. "It's a problem of credibility for OPEC," said Steve Rowles, an analyst for CFC Seymour in Hong Kong. "Can they prevent the slide in prices by not being united?" Societe Generale said the announced cut in output would have little effect because OPEC had been producing below its official quota. "This last OPEC cut was misbegotten and, as a consequence, the organization's subsequent efforts to make the cut credible simply look desperate," the bank said in a report. It said that while OPEC's official production quota was 28 mln bpd, its actual production last month was estimated at only at 27.8 mln bpd. OPEC, at a meeting in Qatar last week, agreed to the output cut in an attempt to put a floor under prices, which have tumbled from the highs of over 78.00 usd hit in recent months. Blaming an over-supplied market, oil ministers from the cartel said the reduction would take effect Nov 1.

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