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Bloomberg News reported that the Organization of Petroleum Exporting Countries (OPEC), the producer of 40 percent of the world's crude oil, has cut production of crude by 1.2 million barrels a day to halt a three-month price slide.
The cuts will start Nov. 1, said United Arab Emirates oil minister Mohamed al-Hamli, following a meeting of member countries in Doha, Qatar. Reductions will be based on the quantities of oil being pumped, rather than quotas. The cuts will reduce the production to 26.3 million barrels a day from the 27.5 million that was being produced in September for the 10 members, minus Iraq. Al-Hamli will become OPEC president in 2007.
The production cut will stop a 25 percent price drop since the record $78.40 a barrel was reached in July.
"OPEC does not have a floor for prices,'' al-Hamli said at a press conference.
Oil prices rose last week on the announcement by Saudi Arabian oil minister Ali al-Naimi that OPEC would "absolutely'' cut one million barrels a day.
OPEC decided to cut more than the proposed one million barrels because "we needed more to stabilize the market,'' Algerian oil minister Chakib Khelil said after the meeting. "Everybody has a share. That is all I can say.''
Since the plan was proposed on Oct. 5, crude oil for November delivery increased 85 cents, or 1.5 percent, to total $58.50 a barrel on the New York Mercantile Exchange, Bloomberg News reported.
An additional 500,000 barrels a day might need to be cut when the group meets in mid-December in Abuja, Nigeria, Venezuelan oil minister Rafael Ramirez told Bloomberg News.
Early last week, OPEC reduced expectations of the amount of crude oil the world will use this year by 200,000 barrels a day, to 28.7 million barrels a day.
The International Energy Agency, an advisor to 26 oil-consuming nations, warned OPEC against cuts that would inevitably keep prices higher and threaten economic growth, Bloomberg News reported.