OPEC Set to Cut Supply in 2009 to Maintain $100 Oil, CGES Says

By Grant Smith

Aug. 18 (Bloomberg) -- OPEC will probably reduce oil production in the first quarter of next year to prevent crude prices falling below $100 a barrel, according to the Centre for Global Energy Studies.

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's crude, will likely trim output by 300,000 barrels a day, and implement a further 500,000 barrel-a-day reduction in the second quarter, the CGES said today in a report. The 13-member group is unlikely to announce the cut at its Sept. 9 meeting unless crude falls to $100 a barrel or lower.

``We expect OPEC to act to defend a price floor of somewhere around $100 a barrel and in order to do this they would need to start cutting production at the start of 2009,'' the report said.

Oil, down more than $30 from its July 11 peak of $147.27, will probably decline further if OPEC decides against curbing supplies and if there are no further unscheduled losses similar to this month's disruption in Azerbaijan, the CGES said.

Iranian OPEC governor Mohammad Ali Khatibi said Aug. 12 that OPEC may consider cutting production at its September meeting to reduce an excess in the market.

Kuwait's oil minister has said any quota decrease is unlikely, and Ecuador said it would be unnecessary. Last month, OPEC President and Algerian Oil Minister Chakib Khelil said there was no need to lower output because prices are ``too high.''

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net