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OPEC Plans to Cut Oil Supply in Bid to Bolster Price
By Maher Chmaytelli and Julie Ziegler
December 14, 2006

Dec. 14 (Bloomberg) -- OPEC, the producer of 40 percent of the world's oil, plans to reduce supplies on concern that rising inventories will cause prices to drop.

The producer group is discussing a cut of 500,000 barrels a day as of Feb. 1, Qatari Oil Minister Abdullah bin Hamad al- Attiyah said today in Abuja, Nigeria, where the Organization of Petroleum Exporting Countries is meeting. OPEC has yet to reach a formal agreement, he said.

The 11-member group may opt to tighten adherence to the 1.2 million barrel-a-day reduction decided upon in Doha, Qatar, on Oct. 20 rather than make new cuts, OPEC officials have said. OPEC has so far made about half the reductions promised at the previous gathering.

"A compromise could encompass a small, 500,000 barrel-a- day Feb. 1 cut, with a late January meeting to reassess the market situation," Mike Wittner, the global head of energy market research at Calyon, a unit of Credit Agricole SA, said by phone from London.

Kuwait doesn't support a 500,000 barrel-a-day cut, Kuwait Oil Minister Ali-Jarrah al-Sabah said before al-Attiyah's comments. "It's a difficult decision to make. We don't support a cut but at the end of the day we have to reach agreement."

The Doha accord was spurred as oil prices slid from a July record of $78.40 a barrel in New York. Crude today jumped as much as $1.35, or 2.2 percent, to $62.72 a barrel on the New York Mercantile Exchange. It traded up 96 cents as of 12:37 p.m. in London.

"There will be a cut," Algerian Oil Minister Chakib Khelil said.

Saudi Arabian Oil Minister Ali al-Naimi said the oil market is "closer to balance" than it was in October. An accord to maintain current production is close and the group may meet again in January, said Libya's top oil official, Shokri Ghanem.

Crude has averaged about $60 since the previous meeting and today rose for a second day on speculation the producer group's meeting will result in lower supplies.

To contact the reporters on this story: Maher Chmaytelli in Abuja through the London newsroom ; Julie Ziegler in Abuja through the London newsroom
Last Updated: December 14, 2006 07:43 EST

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