OPEC to cut oil output by 10 % in two stages

In a surprise move, OPEC will cut excess production of crude at once and lower output quotas by 1 mm bpd effective April 1, several oil ministers said. The Organization of Petroleum Exporting Countries expects the combined cuts to curb its production by about 10 %, or 2.5 mm bpd. OPEC members agreed to the two-stage output reduction in an attempt to keep oil prices stable when warmer weather is expected to erode demand in major importing countries.
‘‘We are agreed that we will cut 1 mm barrels from April 1,’’ said Qatari oil minister Abdullah bin Hamad al-Attiyah. The April cut in OPEC’s official output target of 24.5 mm bpd is unconditional, said Obaid al-Nasseri, oil minister for the United Arab Emirates.

The ministers spoke before a closed-door meeting to ratify their decision at a government-run conference centre in Algiers. OPEC’s urging its members to better comply with agreed quotas was expected, but its decision to make an additional cut in its formal output came as a surprise.
Oil prices were higher after the disclosure. North Sea Brent crude for March delivery was up 54 cents at $ 29.65 in London, while March contracts for light sweet US crude were up 62 cents at $ 33.45 in trading on the New York Mercantile Exchange. The group is still smarting after its 1997 decision to increase production just before an Asian financial crisis that sent oil prices plummeting to $ 10 a barrel.

OPEC has tried recently to take pre-emptive steps to prevent another such price collapse. In September, it defied predictions of an unchanged production target by announcing a 900,000 barrel cut in its output ceiling. OPEC has a long history of pumping oil in excess of its quotas, but Kuwait’s oil minister Ahmad Fahad Al-Ahmad Al-Sabah said its members would be much more serious this time.
‘‘All the signals and all the studies show that the second quarter will be a very bad quarter... Everybody, for his benefit, has to be strict with these resolutions,’’ the Kuwaiti minister said.

OPEC pumps about a third of the world’s oil, and its members are currently producing about 1.5 mm bpd above their output ceiling. When OPEC last met in December, several oil ministers predicted making cuts in their output target at this meeting to prevent oil prices from falling due to the end of winter in the northern hemisphere and a reduced demand for fuel. A recovering US economy and vigorous growth in China have boosted demand more than many had anticipated, but OPEC and industry analysts still expect that demand will drop during the April-June quarter.
‘‘They clearly have to start cutting production now,’’ said Yasser Elguindi, an analyst at Medley Global Advisors, a New York consultancy.