OPEC to cut oil production next month

The Organization of Petroleum Exporting Countries has officially announced that, effective Feb. 1, it will cut crude oil production by 1.5 million barrels a day, or 5 percent.

The move is expected to create the potential for high volatility in the market and lower stock price levels.

OPEC members, who produce two-fifths of the world’s oil, say the cut is needed to stabilize the market price of crude as demand drops in the second quarter. They fear a repeat of December 1997, when a production increase shortly before the Asian financial crisis led to prices of around $10 a barrel.

News of OPEC’s decision sent prices sharply lower yesterday. February crude oil futures fell 94 cents to $29.35 a barrel on the New York Mercantile Exchange.

Saudi Arabian oil minister Ali al-Nuaimi has reportedly said that OPEC will increase oil production if the output cut causes a shortage. On the other hand, some OPEC members suggested that the group might cut output again at their next meeting in March.

-www.truckinginfo.com