By
The Associated Press
VIENNA, Austria (AP) - OPEC announced Wednesday that it will trim its official crude oil production by 5 percent next month, a move likely to anger the United States and the rest of the cartel's biggest customers.
The cuts, to take effect Feb. 1, are aimed at keeping crude prices firm ahead of an expected slowdown in U.S. economic growth and diminishing seasonal demand for refined products such as heating oil. Delegates of the Organization of Petroleum Exporting Countries approved details of the cuts during a formal meeting at the cartel's headquarters in Vienna, Austria.
The 1.5 million-barrel-a-day decrease in production is sure to disappoint the governments of many oil-importing nations. The United States and European Union had lobbied hard for OPEC to keep crude flowing at current levels, given their fears of U.S. economic fragility and a possible global recession.
Typically, a cut in oil output would raise oil prices and likely gasoline prices at the pump. But in this case the possible impact on consumers remains unclear, primarily because Iraq, an important OPEC member, continues to withhold the bulk of its crude from the market.
Iraq is embroiled in a pricing dispute with the United Nations, which regulates all Iraqi exports. Although Iraq is an OPEC member, it has not participated in the cartel's production agreements since the Persian Gulf War.
OPEC ministers justified their action as an effort to stabilize volatile crude prices, and they argued that their economies would suffer if prices plunged. They played down the potential pain their decision might inflict on importing countries.
"This is a very prudent decision. We don't want to hurt consumers, and we want to protect the interests of producers," OPEC Secretary-General Al Rodriguez told a news conference. Said Qatari Oil Minister Abdullah bin Hamad Al Attiyah: "The United States' economy is very important for us, as our economy also should be important to them."
Some OPEC members suggested that the group might reduce output again in March, when they are to meet again to assess market conditions. Iranian Oil Minister Bijan Namdar Zangeneh expressed support for an additional cut of 500,000 barrels at that time.
OPEC supplies almost two-fifths of the world's crude supply. The group is eager to avoid repeating its mistake of December 1997, when it decided to boost output shortly before the Asian financial crisis throttled demand. Prices bottomed out a year later at around $10 a barrel.
This time around, OPEC members fear that prices could collapse again if demand softens, and analysts have said a decision to reduce output was a foregone conclusion. But some said Wednesday that the curtailment might not make much of a difference for individual consumers.
"The cut is not going to have a negative impact on consumers," predicted Leo Drollas, chief economist of the London-based Center for Global Energy Studies. "It's not too bad. It could have been worse."
Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London, said OPEC's widely anticipated decision would not unsettle oil markets.
"The markets have already had so much time to prepare for this decrease that it's absolutely priced in," he said.
