Opec oil producers on Saturday said they had already moved to rein in excess supply, a day after doubts over the group's resolve to cut sent prices into a tailspin. Oil prices fell 4 percent on Friday to the lowest level since July despite the cartel's agreement to wipe out one million barrels per day (bpd) of excess supply from January 1.
Top Opec producer Saudi Arabia said on Saturday that it was not worried by the price fall. "Don't panic," said Saudi Oil Minister Ali al-Naimi. "I tell you it will go up on Monday."
Saudi Arabia had already enforced its cut of 500,000 barrels per day - 5 percent of current production - by reducing nominations to customers, he added.
US prices have dropped by more than $15, or 27 percent from record highs less than seven weeks ago. Opec's own reference crude basket has fallen even faster and was valued at $34.29 even before Friday's fall on international markets.
"Markets appear to want to test OPEC's apparent resolve to defend prices at $33 for the basket. And promises to cut out 'over-production' may not deter them," said Jan Stuart of brokers Fimat.
The Organisation of the Petroleum Exporting Countries has this year been producing at the highest level in 25 years to meet rising demand, while also enjoying prices which are on course for their highest yearly average on record.
Opec now fears an out-of-season increase in oil stocks during the northern winter will weaken prices. Cartel ministers meeting in Cairo on Friday agreed to cut production back to the group's official limit of 27 million bpd.
Seven of the cartel's 11 producers will reduce supply by around 5 percent each to make up the overall reduction. Iran, Venezuela and Indonesia will be exempt as they are pumping at or below official limits.
Saudi Arabia has in recent years led Opec's efforts to improve credibility by enforcing agreed cutbacks.
Traders are sceptical over other producers' determination to reduce supplies. Nigeria, Algeria and Libya, who all want a bigger quota to reflect their higher production capacity, have pledged to reduce a combined 260,000 bpd.
"The market has to see the action and the action will be taken," Algerian Energy Minister Chakib Khelil told Reuters.
Excess supply above formal cartel quota limits has swelled crude inventories to about 5 percent above year-ago levels in the United States, the world's largest energy consumer.
While heating oil stocks in big consuming centres are low, only sustained severe weather would put real strain on supply, analysts said.
A fall in the dollar's value has eroded OPEC's purchasing power from non-dollar economies. Opec ministers will meet again on January 30 to discuss whether further cuts are needed.
"If prices will continue to fall from now to January we will have to cut the ceiling by 500,000 to one million barrels per day," Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah said on Saturday.
Friday's price fall was accelerated by higher supplies from Iraq as flows resumed through the country's northern export pipeline following a 12-day halt.
Consumer nations have urged Opec not to curb supplies, saying oil stocks need to rebuild to calm volatile prices and underpin economic growth.