THE ORGANISATION of the Petroleum Exporting Countries' (Opec) cartel will need to make a sizeable cut in oil production next week, two of its oil ministers said yesterday as Russia moved a step closer to joining the cartel's efforts to halt the slide in prices.
The statements came as the International Energy Agency, the developed countries' watchdog, highlighted the magnitude of the Opec challenge. In its monthly oil market report, published yesterday, the agency said global demand this year would contract for the first time in 25 years.
That collapse has been particularly painful for Russia, the world's second largest producer of oil.
Russian president Dmitry Medvedev yesterday said Russia, which is not a member of Opec, was ready to work with the cartel to boost oil prices.
"Such protective measures could be linked to a cut in oil output as well as taking part in existing supplier organisations or new organisations," he said.
Opec has been eagerly trying to recruit Russia to join its efforts and analysts say together the two could announce a further reduction of as much as three million barrels a day of oil production within the next week.
Chakib Khelil, Algeria's oil minister and Opec's president, told state radio yesterday there was a consensus among Opec members to reduce production when they met in the Algerian seaside town of Oran on December 17th. He said: "The Oran meeting will decide a severe production cut to stabilise the oil market."
Opec, which controls 40 per cent of the world's oil supplies, has pledged to cut output by as many as two million barrels a day since September in an attempt to halt the steep decline in oil prices, which yesterday were up $3 at $46.52 on the Nymex futures exchange.
Mr Khelil's sentiment was shared by Shokri Ghanem, head of Libya's national oil company, who said that relying on Opec's previous cuts would not be enough to boost prices and that the group needed to make a "substantial" reduction at next week's meeting.
The agency's report said the cartel had so far complied with only about half the output reductions it had agreed. Its findings, and that of other organisations following Opec, illustrate a wide split among members' willingness to adhere to the group's decision.
The agency said yesterday that the reduction of supply from Ecuador, Venezuela, Libya and Iran had been "relatively limited" in November - even though Venezuela, Iran and, to a lesser extent, Libya have in the past three months been the most vocal Opec members in demanding the group make deep cuts.
"In the past, Opec has at times struggled to rein in production when crude capacity is rising, a phenomenon that is now re-emerging in the face of weaker demand," the agency said in its report.
This apparent split will make discussions next week more strained as individual members do not like having to burden a disproportionate share of Opec's cuts.
