OPEC to announce cut

December 26, 2001 Posted: 2114 GMT

NEW YORK (CNN/Money) -- Oil prices rose in the U.S. Wednesday in anticipation of production cuts expected to be announced Friday during an emergency meeting of the Organization of Petroleum Exporting Countries in Cairo.

Saudi Arabian Oil Minister Ali al-Naimi said OPEC will announce a production cut of 1.5 million barrels per day when it holds that meeting. Naimi also said he was optimistic that non-OPEC oil producers such as Russia would make good on their promises to curb supply as well.

NYMEX crude futures ended Wednesday's session at a six-week high of $21.27 a barrel, jumping $1.65, or 8.4 percent on the day. Prices had soared to an intraday high of $21.43, the highest seen since Nov. 13, when front month crude peaked at $21.97.

Analysts attributed the sharp spike in prices in large part to short-covering ahead of Friday's OPEC meeting. Last Friday, the Commodity Futures Trading Commission's reported that noncommercial crude oil speculators had increased their net short positions to 71,928 from 69,279 as of last Tuesday.

The rise in short positions reflected skepticism by many fund managers regarding prospects for an OPEC/non-OPEC production cut or its effectiveness in supporting prices, analysts said.

Naimi said there should be no doubt that non-OPEC oil producers would deliver on pledges to curb supplies by 500,000 barrels per day for six months in an alliance with OPEC designed to shore up flagging crude prices.

Russia is the world's second-largest oil producer behind Saudi Arabia.

"It is certain that they will carry out their pledges and that OPEC will comply with the cuts," Naimi said, adding that he was also confident that OPEC countries would stick to reduced output commitments.

He said OPEC and other producers would impose supply curbs, which will total nearly 2 million barrels per day, to lift oil prices to a range of $20 to $25 a barrel.

Naimi added it would be difficult in the current economic slowdown to lift prices back into OPEC's original target range of $22 to $28 a barrel.