Oil prices soar as Opec slashes production

Defying expectations, Opec plans to cut its oil production target by 3.5%, Kuwait’s oil minister said today.

Crude oil futures soared immediately. November contracts of North Sea Brent crude rose 98 cents to $26.50 dollars a barrel on the International Petroleum Exchange in London.

Sheik Ahmad Fahad Al-Ahmad Al-Sabah confirmed the plan after the 11 member group held informal talks at OPEC headquarters in Vienna.

“Opec will cut 900,000 barrels a day from November 1,” he said.

The Organisation of Petroleum Exporting Countries still must approve the cut, which would reduce the cartel’s output ceiling by 900,000 barrels a day to 24.5 million barrels.

The group’s delegates were to meet later in the day to ratify their output decision.

Opec had been widely expected to keep its daily production ceiling at 25.4 million barrels.

However, a recent slide in prices and Opec’s expectations of a surge in oil inventories among major importing countries have raised fears about a further softening of the market.

The cartel pumps about a third of the world’s oil, and its policies can have a significant impact on retail prices for heating oil and petrol.

Opec included Iraq in its informal policy discussions for the first time since the overthrow of Saddam Hussein. Despite the earlier objections of Venezuela, Iraq was to join also in the formal meeting today.