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OPEC Seeks To Tighten Oil Supplies, Stop Price Slide

October 5, 2006

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There's too much crude oil on the market and prices are too low, according to the Organization of Petroleum Exporting Countries, which controls most of the world's oil supply.

The Financial Times quotes unnamed sources within OPEC as saying the cartel has informally agreed to cut output by one million barrels a day.

Oil ministers are reportedly reacting to the falling price of oil which recently slipped below $60 per barrel for the first time in months. As a result of falling oil prices and ample inventories, U.S. gasoline prices have dipped below $2 a gallon in pockets of the country.

However, oil prices jumped back above $60 a barrel following news of OPEC's supposed intentions.

Regular, self-serve gasoline now sells for an average of $2.31 a gallon throughout the country. One month ago a gallon of regular sold for $2.75 and one year ago $2.94.

Prices for midgrade, premium and diesel fuels are falling as well. The national average for a gallon of midgrade gasoline stands at $2.45. Premium gasoline sells for an average of $2.54 a gallon and diesel fuel sells for an average of $2.66 a gallon.

The cost of diesel is now 58 cents a gallon below the record high of $3.24 a gallon set almost one a year ago.

The cheapest gallon of regular gasoline, according to GasPriceWatch.com, is found in Jackson, Missouri at $1.83 a gallon.

The most expensive gallon sells in Hanalei, Hawai for $3.49 a gallon.

The FT quotes sources as saying Libya, Kuwait and Iran have agreed to join Venezuela and Nigeria it cutting oil production.

Saudi Arabia, the cartel's largest producer, is said to be undecided about joining in. The Saudis have reportedly already trimmed their production by 200,000 barrels a day, with little effect.

The sources say a decision is unlikely before OPEC's next scheduled meeting, which is in December. The source says the action would be aimed at reversing a slide that has reduced oil prices nearly 25 percent since August.

Crude prices had briefly fallen to a fresh seven-month low on Wednesday after U.S. government data showed rising inventories of crude, gasoline and heating oil.

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