OPEC set to slash oil output as prices crumble

Organisation of Petroleum Exporting Countries (OPEC), the cartel pumping 40 per cent of world oil, is this week set to announce plans to slash output in the hope of lifting crude prices weighed down by a recession-fuelled slide in energy demand.

The OPEC on Wednesday convenes in the Mediterranean port city of Oran, Algeria, where it is widely expected to announce plans to cut its oil output quota for a third time since September.

Iran, for one, will be calling for a cut at the meeting, the ISNA news agency reported today.

"Our position in the upcoming OPEC meeting in Algeria is a cut of 1.5 million to two million barrels per day in OPEC's quota output," Iranian Oil Minister Gholam Hossein Nozari was quoted as saying.

Julian Jessop, the chief analyst at consultancy Capital Economics, suggested they would probably get their way. "The cartel is likely to announce further cuts of at least two million barrels," he predicted.

Analysts are forecasting a cut of between one and two million barrels from OPEC's official daily output quota of 27.3 million barrels, excluding Iraq.

"OPEC's actions are not in themselves going to drive prices higher again... OPEC cut production just as aggressively during the last global downturn in 2001 and 2002, but oil prices did not take off until 2004 when the world economy grew by nearly five percent," said Jessop.

He added, "The fact that oil prices have continued to fall despite OPEC's announcement of cuts in production totalling two million barrels per day over the last two months underlines the impotence of the cartel in the face of rapidly deteriorating demand."