- The Washington Times - Wednesday, September 10, 2008

From combined dispatches

VIENNA, Austria | OPEC oil ministers have decided to curb overproduction by more than 500,000 barrels per day.

The move is a compromise meant to avoid new turmoil in oil markets while at the same time reflecting OPEC attempts to prevent prices from falling too far. Crude prices have dropped nearly 30 percent since spiking to nearly $150 a barrel in July, according to an Associated Press report.

An OPEC statement issued after oil ministers ended their meeting early Wednesday said the organization agreed to produce 28.8 million barrels a day.

When asked about the size of a proposed cut to OPEC’s current production, OPEC President Chekib Khelil replied: “I think if you do your own calculations, it is a cut of 520,000 barrels per day.”

“Actions (to cut output) will be taken by members as soon as they can, that means in the next 40 days,” he added, according to an Agence France-Presse report.

An OPEC spokesman said that OPEC members had agreed to “strictly” comply with a quota target of 28.8 million barrels per day excluding Indonesia and Iraq.

“Since the market is oversupplied the conference agreed to abide by September 2007 production allocations totalling 28.8 million barrels per day, levels with which member countries committed to strictly comply,” said the spokesman, reading a statement from the organization.

The 13 members of the Organization of Petroleum Exporting Countries held late-night talks Tuesday to Wednesday before coming to their decision, which is likely to boost sagging crude prices.

The OPEC statement identified a shift in sentiment in the oil market linked to falling economic growth, a strengthening dollar, easing geopolitical tensions and greater supply.

“All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook,” it said.

World oil prices rebounded in Asian trade Wednesday after the OPEC decision, dealers said.

New York’s main contract, light sweet crude for October delivery, rose by 92 cents to $104.18 a barrel while Brent North Sea crude rose 65 cents to $101.07.

The OPEC meeting, which did not begin until late Tuesday because of Ramadan fasting, had been expected to keep output targets unchanged, according to a Reuters news agency report.

Tony Nunan, manager for energy risk at Mitsubishi Corp in Tokyo, said the OPEC move reminded him of the U.S. government’s federal takeover of ailing mortgage giants Fannie Mae and Freddie Mac, which sparked a rally in global stock markets.

OPEC’s decision “is a necessary move to keep the market from collapsing,” he told AFP.

“But that doesn’t mean that it’s going to send the market back up very fast. I think it will take more time before the market can really rally from here,” he said.

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