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
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
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
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
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.