Transcripts

OPEC To Curb Its Output

PAUL KANGAS: Crude oil prices gained $0.85 a barrel today to close at $58.50 as OPEC readied to cut output for the first time in two years. Meeting in Qatar today, OPEC ministers debated whether to trim actual output or production quotas. Experts say OPEC is trying to return a sense of equilibrium to the marketplace. Suzanne Pratt reports.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: OPEC is hoping a cut in production will stabilize oil prices worldwide and help the cartel regain control of the market. But many experts say the market had already discounted a drop in output. On top of that experts say discord between OPEC members in the last few weeks has weakened the cartel's influence.

RAY CARBONE, OIL TRADER, PARAMOUNT OPTIONS: When you have infighting with OPEC, it's usually bearish. We saw this in the late '80s, all the way through the '90s. It's only when OPEC agrees and they have their act sort of on the same page that the market really took off and went to the highs of the last few years.

PRATT: In the last three months, oil prices have fallen about 25 percent from a mid-July high of just under $80 a barrel. In the last few weeks prices have been trading around $60 a barrel. Experts say OPEC no longer formally targets a particular price, as it did just a few years ago. But it's clear to many that $55 a barrel is the number the cartel wants to defend.

KEVIN SAVILLE, MANAGING EDITOR, PLATTS: They would be happy with a price in the mid $50s to $60. They would still be getting enough revenue from crude sales in order to fund capital projects back home. And at the same time, $55, that we've seen over the past year and even higher, is not even enough to cause what they call demand destruction. PRATT: Experts say in an effort to keep prices at current levels, OPEC's largest producer Saudi Arabia is already talking about the group's December meeting, saying a cut in output then is certainly possible.

SAVILLE: Hopefully that will show the market that OPEC is serious. They want to establish credibility in the market after they had let the market get away from them over the past year and a half.

PRATT: OPEC's power may be somewhat diminished, but mother nature's is not. Experts say if winter is harsh, that will go a long way to stabilizing oil prices. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.