Opec Head Says All Members To Cut Output By 1 M BPD

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Jakarta, April 6: Opec will make good an agreement to cut group output by one million barrels per day (BPD), but will allow leakage of barrels if oil prices are strong, Opec president Purnomo Yusgiantoro said on Tuesday.

"We are firm with our decision and the members will follow the decision," said Purnomo, who is also Indonesian oil minister, referring to the March 31 decision to go through with the production cut from April 1. The cut brings Opec’s official output ceiling to 23.5 million bpd, excluding Iraq.

"We also allow leakage if the price is strong, but currently the price is not reflecting fundamentals. There is enough crude oil in the market, but the problem is gasoline in the United States," Purnomo told reporters. He did not say how much oil the cartel was currently producing over official limits. Venezuela, South America’s only Opec member, said late on Monday that all Opec members should follow the March 31 decision and reduce production.

"There is a firm decision in the Opec ruling and it should be respected," oil minister Rafael Ramirez said.

Kuwait and the United Arab Emirates (UAE), concerned about prices rallying to 13-year highs last month, had unsuccessfully sought to delay the output cut. Kuwait’s foreign minister said on Friday that the cartel was unlikely to follow through with the cuts if crude prices rose above Opec’s target price range.

US crude prices have dropped more than five per cent, or almost $2 a barrel, since the Organisation of the Petroleum Exporting Countries confirmed last Wednesday that it would carry through the output cut, which was first decided in February.

The producers’ group, which controls half of the world’s traded crude oil, says that the cut is needed to avoid a glut in supply in the second quarter, when global demand normally tails off at the end of winter and before summer consumption of gasoline kicks in during the holiday period. They fear any big build in inventories may lead to a collapse in oil prices.

One factor boosting oil prices this year has been the low stocks of gasoline in the United States, the biggest user of the motor fuel.