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Oil Producers to Announce Major Cuts
Reuters
THE HAGUE — Key oil producers in an emergency summit say they will announce output cuts aimed at erasing the supply glut that has dragged prices to historic lows.

"It is a significant cut," said Saudi Arabia's oil minister Ali al-Naimi, predicting an agreement later Friday. "It will definitely remove the glut and would definitely improve the price."

OPEC producers Saudi Arabia, Iran, Algeria and Venezuela, together with non-OPEC Mexico are hammering out a total new producer cut package of 1.5 million to two million barrels per day (bpd), a Mexican official said.

The new agreement is expected to involve all 10 OPEC members already linked in a 2.6 million bpd cutback deal, as well as non-OPEC Mexico, Norway and Oman.

Saudi Arabia, responsible for around a third of OPEC production, was expected to take a large cut of around 500,000 bpd, Gulf oil sources told Reuters.

A third session of the talks in the Dutch capital began at 0900 GMT, following over seven hours of discussions Thursday.

Norway's Oil and Energy Minister Marit Arnstad Friday confirmed that Norway might consider deeper cuts too if The Hague meeting produced agreement.

The package now being thrashed out in The Hague would be bolstered by a further 305,000 bpd of sacrifices to cover for previous cuts not implemented by Iran, the Mexican official added.

But it was still to be decided whether that 305,000 bpd should be divided among just the Gulf oil producers or between the 13 OPEC and non-OPEC countries set to contribute to the new deal, the official said.

Iran, which has now convinced other producers that its baseline for initial cuts was overestimated, now appeared ready to cut about another 200,000 bpd starting from its new 3.6 million bpd baseline.

Ministers were trying to strike a balance between "a spectacular new agreement to boost oil prices and one that was realistic enough for oil markets to find credible," the Mexican official said.

The new Venezuelan government's insistence that it is unable to curb supply further was not expected to be an obstacle to an agreement, sources said.

Venezuela's position is critical because it competes head-on with Saudi Arabia and Mexico to supply the pivotal U.S. market. Last year's cutbacks went forward only after the three agreed a truce.

Analysts say producers must shed at least a million bpd to make up for poor world demand growth, a chronic surplus of spare stored oil, and rising export volumes from Iraq, which does not participate in the restraint agreements.

Oil prices have already got a lift from the signs of renewed producer action, posting four month highs Thursday at $12.70 a barrel.

Last year's total three million bpd producer cutback deal failed to prevent oil prices sagging below $10 to their lowest level for a quarter of a century.

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