OPEC to Trim Oil Production

The Organization of Petroleum Exporting Countries (OPEC) has decided to cut oil production by about 1 million barrels per day in order to fight the dwindling oil prices.

This is the first time in the last two years that the cartel has decided to hold back production, though the member countries have been cutting production voluntarily over past couple of months. The announcement lead to an increase in the prices of crude oil. U.S. oil rallied on the news, hitting $60.85 a barrel, up nearly $1.44, at one point.

OPEC's sixth biggest producer Nigeria and fourth biggest Venezuela last week announced token output cuts, totaling 170,000 barrels per day or less than one percent of OPEC's output.

All OPEC members apart from Iraq, exempt from quotas, and Indonesia, a net importer, are to take part in the supply curbs which amount to just over 3 percent of total OPEC output.

The 11-member organization will meet in Nigeria on December 14 to discuss the issue. There has been a 25% drop in the prices since July, when it touched $78 to an eight month low of $57.75.

Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah raised the chance of broader action on Wednesday, telling that Kuwait may also cut back if prices continued to fall sharply.

"OPEC is closely watching developments in oil markets, especially crude stocks, which we've seen rising gradually. This might create further pressure in the market," A delegate said. "OPEC is concerned about prices but the most important thing they are concentrating on is inventory levels." He added.

“Obviously, OPEC has seen that the world economy can keep going at $65 to $75, so they don't see any reason why prices should fall too much further," said Andrew Harrington, a resource analyst at ANZ Bank.

``If OPEC waits until December to make a decision, the market may shrug off the radical members' output cuts,'' said Tony Regan, Singapore-based lead consultant at industry adviser Tri- Zen International Pte. ``Unless OPEC called an emergency meeting in the next couple of weeks, oil prices may slide to the $55, $50 level to test the organization's resolve.'' He further added that the OPEC members needed to show solidarity and its resolve to defend the prices.

Saudi Arabia is unhappy with the move toward voluntary cuts, the Financial Times reported. Even so, OPEC's biggest producer has reduced output by 200,000 barrels a day over the past two months, the newspaper said. It will though further reduce the production by 300,000 bpd from September's 9.1 million bpd.