Iran, Venezuela Put Forward 2 Million Barrel OPEC Cut

By Fred Pals and Ayesha Daya

Dec. 16 (Bloomberg) -- Iran and Venezuela said OPEC may need to cut oil production 2 million barrels a day at tomorrow’s meeting to revive prices as demand slumps.

Iran supports a reduction of that size, a delegate from the country said today. Venezuelan Oil Minister Rafael Ramirez said a “big” cut of between 1 million and 2 million barrels a day is needed at the meeting in Oran, Algeria. Production targets for 11 members with quotas stand at 27.3 million barrels a day.

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, is gathering for the fourth time in as many months to discuss further production cuts after crude prices plunged more than $100 from July’s all-time high. Prices rose above $45 a barrel in New York today.

“There is too much oil on the market right now,” said Johannes Benigni, chief executive officer at consultants JBC Energy GmbH in Vienna. “Whatever they do now, presumably more than a 2 million barrels a day cut, is going to help, but what helps the psychology is that Russia has also announced they may join in.”

World oil demand will fall 0.2 percent next year as the global recession cuts energy consumption, OPEC said today in its monthly report. Europe’s manufacturing and service industries have contracted in December at the fastest pace in at least a decade, a report today said.

Asking Russia

OPEC is asking Russia, the largest oil exporter outside the group, to reduce oil output by between 200,000 and 300,000 barrels a day to help revive prices, OAO Lukoil Chief Executive Officer Vagit Alekperov said in Moscow yesterday.

Oil stockpiles are rising as the winter approaches, which is abnormal, so a production cut of 2 million barrels is needed to restore the balance of supply and demand, the Iranian official, who declined to be identified by name, said in a telephone interview today.

The Iranian delegate said OPEC should aim to reduce oil industry stockpiles to about 52 days worth of forward demand, from recent levels of more than 56 days. The final decision on supply cuts will depend on what price level OPEC members want, the official said.

“We have to make a very strong decision,” Ramirez told reporters after arriving in Oran for tomorrow’s meeting. “What’s important is that there’s consensus to cut and that we have to make a big cut.”

Angola Speaks

Angola’s oil minister, Jose Maris Botelho de Vasconcelos said today members will cut oil production as much as 2 million barrels a day at this week’s meeting to get prices near $75 a barrel. Oil ministers from Algeria, Kuwait, Qatar and Libya have said this month they support a cut in production.

OPEC will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg. All those canvassed expected OPEC to make a cut.

Crude oil for January delivery rose as much as $1.18, or 2.7 percent, to $45.69 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $45.58 at 1:11 a.m. London time.

Saudi Arabia wants a production cut of between 1 million and 1.2 million barrels a day, Dow Jones reported, citing a person it didn’t identify.

The price slump spurred the Organization of Petroleum Exporting Countries to cut output for the first time in two years when it met in October. The group deferred a decision on further cuts at its Nov. 29 consultative meeting in Cairo.

To contact the reporters on this story: Fred Pals in Oran, Algeria at fpals@bloomberg.net; Ayesha Daya in Oran, Algeria at adaya1@bloomberg.net.