Opec cuts production by 6 per cent to boost prices

Opec confirmed today it would cut 1.5 million barrels from its daily crude production in an effort to firm up sagging oil prices.

Oil ministers from the Organization of Petroleum Exporting Countries agreed in an emergency meeting to cut their official output by 6 per cent beginning on 1 January. The cuts are to last for six months, Opec officials told a news conference in Cairo.

Opec decided to proceed with the cuts even though rival, independent producers such as Russia and Norway promised reciprocal cuts that were smaller than expected. Opec, which has already reduced its official production by 3.5m barrels a day this year, is weary of doing so only to see producers outside the group increase their market share as a result.

The issue came to a head this autumn as the weakening world economy, together with the uncertainty caused by the11 September attacks on the United States, dragged down prices by some 30 per cent.

Oil markets gave mixed signals earlier as Opec was putting the final touches on the the production cut it agreed to last month.

The price of Brent crude contracts for February delivery rose 29 cents to $20.63 a barrel, after jumping by$1 yesterday on the International Petroleum Exchange in London.

Opec's benchmark crude price averaged $18.68 a barrel yesterday.

Rilwanu Lukman, Nigeria's presidential adviser on petroleum and energy, said the cut would be "more than enough" to lift Opec's benchmark price to $22 a barrel – the group's minimum target price.

"We hope that prices will stabilize within reasonable limits, meaning between $20 and dlrs $25. This is what is expected now," Saudi Arabian Oil Minister Al Naimi told reporters just before the meeting began.

"But nothing guarantees the stability of a certain price because the price, at the end of the day, is determined by market mechanisms," he said

Non–Opec producers have so far promised to cut by a total of 462,500 barrels a day – 37,500 barrels less than OPEC had asked for. The group decided not to let this discrepancy hold it back from putting its own cuts into effect.

Among non–Opec members, Norway and Russia have each pledged to decrease daily supplies by 150,000 barrels, while Mexico has promised to reduce by 100,000 barrels, Oman by 40,000 barrels and Angola by 22,500 barrels.

OPEC's current daily target is 23.2 million barrels, and it pumps about a third of the world's oil.