September 26, 2003	Friday	Rajab 28, 1424

VIENNA: Opec’s shock oil supply cut shows the cartel’s leading producer Saudi Arabia is not prepared to compromise on high oil prices despite efforts to mend diplomatic ties with the West.

Analysts said Wednesday’s output pact sends a powerful message that the Saudi-led cartel is determined to defend crude near the top of its $22-$28 price target, even at the risk of upsetting Washington.

Riyadh has come under heavy fire in the United States since the September 11, 2001, attacks but won marks from the Bush administration for opening the pumps before US-led troops invaded Iraq.

“Before the Iraq war the Saudis got scared that the US would throw its weight around the region,” said Rosemary Hollis, head of the Middle East programme at the Royal Institute of International Affairs in London.

“With the US reconstruction not panning out as Washington would wish, the Saudis aren’t scared any more.”

US-occupied Iraq’s attendance at Baghdad’s first post-war Opec meeting had raised hopes among some importing nations for cheaper fuel down the road.

Opec’s deal took no chances in allowing a glut to develop and derail a four-year price boom. It cut output by 3.5 per cent to 24.5 million barrels a day for 10 member countries even as demand for the cartel’s fuel rises for winter.

The decision was rewarded with a 5.5 per cent price jump, pushing US light crude prices to $28.55 a barrel in Wednesday trade.

“Over the past few years Opec has consistently shown its determination to take pre-emptive action to support its price targets, something the market still clearly struggles to come to terms with,” said Kevin Norrish of Barclays Capital in London.

The world’s big economies, struggling for growth, now face an uneasy winter with oil prices back near the $30-a-barrel pain barrier.—Reuters