OPEC oil producers have pledged to cut one million barrels per day of excess production to stop inventories building too fast.
Saudi Arabia has enforced its pledge to cut 500,000 barrels a day of oil supply and is now producing around nine million barrels per day, Saudi Oil Minister Ali al-Naimi said today.
OPEC oil producers last month agreed to cut one million barrels per day of excess supply from January 1st in an effort to cap a forecast out-of-season build in stocks during the northern winter.
Top cartel producer Saudi Arabia pledged to shoulder half the total cut, or 500,000 barrels per day.
Oil prices have fallen nearly 25 per cent from record highs hit in late October. Some OPEC ministers have said that the group may need to cut production quotas when it meets on January 30th to stop prices falling further.
Naimi refused to be drawn on whether OPEC was likely to cut, saying that the group would first need to assess supply and demand trends. "We'll have to look at the data," he said.
Oil prices rose 34 per cent in 2004, driven up by rising consumption in China, India and the United States. OPEC pumped at its highest level in 25 years to meet the demand, leaving little capacity spare to cope with supply problems.
Demand growth is expected to ease this year, but Naimi declined to speculate on whether prices would continue to fall. "Let's leave that all up to the market" he said. OPEC's own reference basket of crude oil was last valued at $35.67 a barrel, still well above the formal $22-28 a barrel price target. Several OPEC ministers have called for OPEC to raise its formal price target, but Saudi Arabia has not yet stated what it would prefer as a new range.