Crude oil gains as OPEC, non-OPEC producers announce cuts

17 December 2008

Crude oil prices rose for the first time in four days after Saudi Arabia said Organisation of Oil Producing Countries will make a record production cut to reverse a record $100 fall in prices and major non-OPEC oil producers agreed to coordinate production cuts with OPEC.

OPEC today got the backing of non-OPEC Russia and the former Soviet republics of Azerbaijan and Kazakhstan to coordinate oil production and help prices.

While OPEC has agreed to cut back production of up to 4 million barrels per day from next year, Russia plans to slash exports by 320,000 barrels a day if prices continue at current levels. Kazakhstan may also pump less crude, while Azerbaijan was willing to cut as much as 300,000 barrels a day.

"We have production capacity of 1 million bpd, but currently output is reduced to 840,000 bpd and we are ready to cut further to 540,000 bpd and sustain this production for several months," Azeri energy minister Natik AliyevAliyev said.

Most of Azeri oil output is controlled by a BP-led consortium, which reduced production in the past months due to technical problems at an offshore platform in the Caspian Sea.

The combined cuts could effectively reduce crude oil supplies by 4.6 million barrels a day from the market.