Opecs decision to cut over-production and reduce its output ceiling by one million barrels per day (bpd) from April was aimed at preventing a potentially damaging build-up in oil inventories, Saudi Arabian Oil Minister Ali Nuaimi told the Middle East Economic Survey (MEES).
Nuaimi, in an interview with the industry specialists in Algiers after the cartel met on Tuesday, noted that Opec data predicts a reduction in demand or surplus of three million bpd in the second quarter and the International Energy Agency foresees a three-four million b/d reduction.
"So the quandary was: what do you do, do you wait until you have a huge build-up in inventory and have a precipitous price fall or do you take a pre-emptive, pro-active course of action?" Nuaili said.
"The decision was to do two things. One, effective 1 March, eliminate as much as possible the leakage. Thats very straightforward ... The second decision was ... to effect a reduction of one million bpd from the current ceiling, not from the level of production, because we are assuming that the level of production will be as close as possible to the ceiling."
In London, oil prices slipped early Wednesday as traders took a sceptical view of Opec's ability to achieve the hefty output cuts it announced a day earlier to the surprise of the market.
The price of benchmark Brent North Sea crude oil for March delivery fell 22 cents from the previous closing price to 29.82 dollars.
New York's reference light sweet crude March contract lost seven cents to 33.80 dollars in pre-opening electronic deals.
World oil prices had surged Tuesday after the Opec ministers wrong-footed the market by announcing the production cut.
The minister underlined the cartels commitment to an average Opec basket price of 25 dollars a barrel and argued that commercial inventories should remain at present levels.
"We would like the Opec basket to be a straight line 25 dollars a barrel. But there is no way anybody can guarantee that, so we have to prevent it from heating up too high or cooling down too fast," he said.
And he said the planned use of strategic reserves to manipulate oil prices was a concern to Saudi Arabia, the world's leading oil exporter, and to Opec.
"With what we are producing now we will have a significant build in the second quarter beyond the normal. Thats a tough one. This is why we are saying we are taking proactive action now. If we can help it we would like stocks where they are today. A stock build always concerns us."
"Stock levels should come down in OECD countries," he added.
"We have developed enough rapport, enough reliability between the producer and the consumer that we should be the repository of the inventory. I realise they will always need some commercial inventories but this hype about building strategic reserves threatens the price in one form or another".