KUWAIT – OPEC paved the way for a cut in oil supplies early next year with an agreement on Monday that aims to pull cartel production back within its official limits.
OPEC, provider of a third of the world's oil, retained its official 28 million barrels per day (bpd) ceiling to keep consumer nations supplied through the winter. But it said it would rein in excess output to prepare for slacker demand in spring.
"Now we are preparing ourselves for the second and third quarters of next year because in these two quarters demand is usually less," Libyan Energy Minister Fathi Omar Bin Shatwan told reporters after the meeting.
Ministers said the deal would mean a reduction of 200,000-300,000 bpd, a drop in the ocean for the 84 million bpd global oil market even if wayward OPEC producers adhere to it.
But the move could set the stage for a bigger cut.
"We have to comply with the ceiling now, and maybe we will discuss a cut in the future," Shatwan said.
Qatari Oil Minister Abdullah al-Attiyah suggested a deeper cut was just around the corner.
"We are paving the way for the meeting at the end of January. I think that meeting will be very important," he said.
"We will take steps to cut production if we see the market is saturated and now I see the market has started to become saturated."
U.S. oil climbed as high as $60.28 after the deal on the New York Mercantile Exchange, then eased back to $59.80, up 41 cents. In real terms, the cost of a barrel of oil this year has been the highest for a quarter of a century, hurting economic growth.
"The market is focusing on the word 'cut' but OPEC is absolutely right to be worried about the second quarter," said Mike Rothman, an oil analyst at ISI group.
The cartel has been pumping at a 25-year high in response to near record prices and calls from consumer nations worried about the cost to their economies.
OPEC countries have grown accustomed to high prices. But some in the cartel are worried the good times could end with the spring thaw. Demand normally slips and oil stocks build in the second quarter. Prices consequently slide.
Ministers will meet on Jan. 31 in Vienna.
"It warrants a review as we get closer to the second quarter of 2006. That may warrant actions of a different kind to keep the market in balance," Saudi Arabian Oil Minister Ali al-Naimi, the most influential voice in OPEC, said.
Naimi, who steers oil policy for the world's biggest exporter, said oil stocks in the industrialized world were already relatively high.
"If we continue the way we are, that number will increase....That's a lot of crude sloshing around...so come the second quarter that could be a heavy depressant on price. I wouldn't use collapse, but I would say decline," he said.
As expected, OPEC's offer to supply all its spare oil will lapse at the end of December. The cartel made the gesture in September in response to prices that raced to a record $70.85 a barrel, but there have been few takers for the crude.
Strong buying from the United States, China and India has fueled a two-year rally that has seen a doubling in the oil price. A shortage of refineries to churn out gasoline, diesel and heating oil has added impetus.
While the refining crunch is beyond OPEC's control, the cartel has done what it could to tame runaway prices. Since March, Saudi Arabia along with its Gulf colleagues has opened the taps to help quench booming demand.
That strategy -- which has seen them pumping well above their OPEC quotas -- has met success, with commercial fuel tanks brimming. But it might be best for the producers to quit while they are ahead.
Big consumer countries have fretted that high oil prices are hurting their economies. Saudi Arabia's Naimi has said he believes market volatility is more of a threat.