6 OPEC Countries Agree to Curb Oil Output

By Julie Ziegler and Andy Critchlow
Bloomberg News
Monday, October 9, 2006

Saudi Arabia and five other OPEC members reached an informal agreement to cut oil output by a total of 1 million barrels a day, a spokesman for the organization said. The Organization of the Petroleum Exporting Countries has sought to revive oil prices, which have lost a quarter of their value in two months.

The cutbacks, which would amount to a 3.4 percent reduction from September's output, include pledges made by Venezuela and Nigeria late last month to reduce production by 170,000 barrels a day. The OPEC spokesman, Levi Ajuonuma, said the cuts would be "voluntary."

Saudi Arabia, Venezuela and Nigeria are joined in the agreement by Kuwait, Libya and Algeria, Ajuonuma said. OPEC is expected to announce today whether it plans to hold an emergency meeting to ratify the informal agreement.

Normally, OPEC members are reluctant to cut output, and they look to Saudi Arabia, the group's biggest producer, to lead with cuts of its own. Kuwait has not cut its production since 1998.

OPEC, which pumps 40 percent of the world's crude, agreed at a meeting on Sept. 11 to leave a production quota for 10 of its members unchanged at 28 million barrels a day. Since the meeting, the group's so-called basket oil price dropped 9.3 percent to $55.07 a barrel.

"Any 1 million-barrel cut will certainly drive prices a little higher," said Peter Heintzelman, head of Middle East energy and crude products trading at Standard Bank PLC in Dubai, United Arab Emirates. "Prices may not react that violently because question marks will remain over countries' compliance with any agreed cuts."

Prices reached a low of $58.68 a barrel in New York on Oct. 3, down from $76.98 on Aug. 7. They settled at $59.76 on Friday.

The lower oil prices have been one factor in a decline in retail gasoline prices in the United States. A survey released yesterday showed that the national average for self-serve regular gasoline was about $2.28 per gallon on Oct. 6, down from $2.42 two weeks earlier.

Gas prices peaked Aug. 11 at $3.02 and have dropped nearly 75 cents since then, according to the Lundberg Survey of 7,000 gas stations across the country.

The lowest average price in the most recent survey was in Des Moines, at $2.03 a gallon for regular.

The highest was in Honolulu, at $2.91.

Staff writer Steven Mufson and the Associated Press contributed to this report.

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