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Sun 2 Nov 2008 06:25 AM

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Iran informs buyers of supply cut

Islamic Republic says buyers will receive less oil in line with OPEC decision to cut output, minister says.

Iran's oil minister said on Saturday France's Total, a buyer of Iranian crude, had been informed it would receive less oil in line with an OPEC decision to cut output, an Iranian news agency reported.

Oil minister Gholamhossein Nozari, in comments carried by Mehr News Agency, said other customers had yet to be informed.

Under a deal reached last month, the Organisation of the Petroleum Exporting Countries agreed to cut output by 1.5 million barrels per day (bpd) from Nov. 1. Iran, whose share of the cut is 199,000 bpd, had said it was committed to the move.

OPEC acted after oil prices dived from a July record of $147 a barrel to less than half that figure. US crude closed around $67 a barrel on Friday. Economists say Iran needs around $70 to $75 a barrel, or more, in order to balance its books.

"We have announced the drop in our production to this company [Total], and the level of the drop in oil sales to other companies will be announced subsequent to calculations about the sales reduction," Nozari said without giving figures.

The French oil giant has in the past been buying around 80,000 bpd of crude for its refining system from Iran, OPEC's second biggest producer.

Japan and China, respectively, are the first and second biggest buyers of Iranian crude. Other buyers include firms from Italy, Spain, Taiwan, South Korea and India.

The oil minister said the decision to cut sales to Total was not political, adding: "Iran will have to cut 199,000 bpd from its production, part of this drop in production will be done through [a drop] in consignments [to customers]."

Total said this year it would not invest in an Iranian gas project for now because of political tensions, one of several Western energy firms to back away from the Islamic Republic, which is locked in a row with the West over its nuclear plans.

In comments reported earlier, Nozari said OPEC would hold another emergency meeting, like the October gathering in Vienna where the latest cut was agreed, if prices fell more. He also said the group would cut output further if necessary.

Iran has been producing a little more than four million bpd although officials have declined to announce the targets that were set for before and after OPEC's latest production cut deal. (Reuters)

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