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Oil slips below $60 as questions linger of OPEC resolve to cut output

Oil fell below $60 on Monday as investors put money into other commodities and waited for signs that OPEC members would adhere to their pledge to cut crude supply. US light crude was down $1.62 at $59.13 a barrel by 15:15 GMT, and Brent crude fell $1.80 to $59.28 a barrel.

To date, OPEC's largest exporter, Saudi Arabia, and the UAE are the only countries to have informed customers of supply cuts. Even though Nigeria has also told customers to load less, its total exports have remained steady.

The majority of OPEC member states reiterated their commitment to cut output on Monday, lending support to crude prices, though the full market impact is not expected to be felt until late or mid-November.

Kuwait's energy minister, Sheikh Ali al-Jarrah al-Sabah, said Monday he believed some OPEC member countries would implement their share of the cut gradually due to customer commitments. OPEC agreed at a meeting in Doha earlier this month to reduce collective output by 1.2 million bpd as of November 1.

"I don't think they will meet all the cuts in the first week of November," Sheikh Ali told reporters at Parliament.

"You know they have already committed and when we agreed this, most of the countries have set the fixing [allocations] so it will take some time," he said. "But probably middle of November or end of November we will see some effect, probably."

The minister reiterated that Kuwait, which produces about 2.5 million barrels per day (bpd), is committed to cut its output by 100,000 bpd. Some OPEC ministers have said another cut of 500,000 bpd by the exporting group could follow at the December gathering. They said they were concerned about high fuel stocks in consumer countries and a projected drop in demand for OPEC oil in 2007.

Hojjatollah Ghanimifard of the National Iranian Oil Company (NIOC) said Iran, OPEC's second-largest oil producer, would cut European spot crude sales by about 125,000 bpd from November 1 and trim 55,000 bpd off supply to domestic refiners to honor the OPEC pact. Oil officials from Libya and Algeria also reiterated their commitment to cut output, though both have yet to inform customers.

Indonesia, OPEC's second-smallest producer, was the only member state to break ranks on Monday by insisting that it should be spared from the group's cutback. "Our production was already low. Why should we cut it? I think other OPEC members will understand about Indonesia's situation," the country's OPEC governor Maizar Rahman told reporters.

Beirut,11 14 2006
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The Daily Star
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