CAIRO, Egypt — OPEC is poised to cut the amount of oil it will supply to markets in coming months, in a move that would signal the cartel is seeking an increase of about one-third of its current target price for crude.
Gathered in Cairo for a meeting Friday, ministers of the Organization of Petroleum Exporting Countries said they needed to reduce output now by at least one million barrels a day, or about 3.6%, to preclude a buildup of inventories that could weaken prices when demand declines for seasonal reasons in the spring.
OPEC ministers also were expected to discuss further measures, including a reduction in production quotas that would take effect around March, when demand is expected to decline, or to call a meeting for early February to consider a quota cut.
Crude oil has plunged more than 20% since climbing to a new high of $55.17 a barrel on the New York Mercantile Exchange in late October, prompting some in OPEC to fear a price collapse. The cartel has been pumping at its highest levels in a quarter century to meet red-hot demand and has been exceeding its production quotas. Benchmark U.S. light, sweet crude for January settled at $42.53 Thursday afternoon on the New York Mercantile Exchange, up 59 cents.
The expected move to trim output also comes as the cartel has been considering an informal attempt to seek a higher minimum price for oil than its existing target, say people familiar with the talks. Cutting output to defend prices at today's levels would signal that OPEC effectively has bumped up its target by a third or more. The cartel is eager to compensate for the decline in the value of the dollar and to meet the government-revenue needs of its members. Oil is bought and sold in dollars.
The situation was fluid Thursday night, and some officials cautioned that the ministers might decide on another course, including standing pat or generally calling upon member states not to produce above their quota levels.
OPEC's ministers are moving toward an informal agreement to raise the price floor to $30 a barrel or higher for a basket of crude-oil types sold by the cartel. That would mark a rise of as much as about one-third from the current target range of $22 to $28, a level fixed in March 2000 and which helped steady oil prices for the next three years. Oil has been trading well above the cartel's existing target for some time; an increase in the floor would mean OPEC would try to prevent prices from falling back to where they were before this year's big price spike.
The rise would translate into a price of nearly $40 a barrel for the higher-quality U.S. benchmark oil, which fetches a premium of some $8 a barrel currently. If it resulted in higher oil prices, an increase in the floor price could cause a drag on the world economy, as airlines, motorists and people who heat their homes would effectively be paying a "tax" to suppliers in the form of bigger energy bills.
An OPEC strategy committee has submitted a report on raising the price range to the ministers. The idea of formally boosting the price band was on the agenda of Friday's meeting. But officials from several delegations cautioned against expecting a formal change in the band now, even if ministers reach a gentlemen's agreement on a higher level.
Several ministers have suggested defending a floor price of $30 a barrel or higher. Libyan oil minister Fathi bin Shatwan on Thursday called for an even higher mark, saying, "Most [in OPEC] think we should defend $35 a barrel. I can't say all, but people I meet are agreed on that." That would be equivalent to about $43 a barrel for the U.S. benchmark crude, which trades at a premium to OPEC's less-desirable grades.
Seeking a boost entails risks. Failure to make the increase stick could undermine the cartel's credibility with oil traders. Success carries risk, too. Petroleum remains expensive by the standards of recent years, and pricey oil could sap economic growth — and hence demand for oil. The International Energy Agency, representing most big oil-consuming nations, has cautioned OPEC against trimming output before inventories build to comfortable levels.
Ten of OPEC's 11 members are producing some 28 million barrels of oil a day, or one million barrels a day above their output ceiling of 27 million barrels a day. The 11th member, war-torn Iraq, doesn't have a quota but produced an estimated two million barrels a day in November.
—Simeon Kerr and Maya Jackson Randall contributed to this article.
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