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Last Updated: Thursday, 9 December, 2004, 23:24 GMT
Opec 'to cut production levels'
Opec meeting in September 2004
Opec nations are pumping at 25 year highs
Oil producing cartel Opec will cut back on overproduction early next year to prevent a further fall in prices, Kuwait's oil minister has said.

Ahead of Friday's Opec meeting in Cairo, Sheikh Ahmad al-Fahd al-Sabah said all 11 members supported a drop to bring production back within quotas.

Opec nations are pumping at a 25-year high, amid strong demand from the US and China and recent supply disruption.

On Thursday US light crude closed up 59 cents at $42.53 a barrel in New York.

In London, Brent crude was up 98 cents at $39.67 a barrel.

Record highs

Opec ministers are expected to formally set output policy for the next few months on Friday.

Traders said the rise in prices on Thursday appeared to anticipate a move by Opec.

Opec production probably needs to stay about where it is
Guy Caruso, EIA head

If overproduction comes to an end, prices will probably be maintained "where they are, or they could go a little higher," said analyst Diane Munro at Wood Mackenzie.

The possibility of a cut in Opec production has increased as the price of crude fell from record highs of more than $55 a barrel in late October.

Opec countries are currently pumping up to 1.7 million barrels a day more than official quotas of 27 million barrels.

Production from Opec member Iraq, which is not included in the quotas, takes the total to about 30 million barrels a day.

Dollar pressures

Although crude prices are still about 30% above the start of the year, the fall in the value of dollar has also hit Opec revenues.

The drop in prices in recent weeks came amid increased supply from both Opec and non-Opec producers, growing stocks and a relatively mild start to the winter.

"Overproduction has achieved its purpose of bringing the price down," said Edmund Daukoru, adviser with the Nigerian government.

"It was not meant to crash the price, it was meant to moderate the price."

The US, meanwhile, is urging Opec to keep production at the same level.

"Given where inventories are, Opec production probably needs to stay about where it is," said Guy Caruso, head of the US government's Energy Information Administration (EIA).

"We think on average we'll need more Opec crude next year than we got this year."

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