VIENNA - After hours of wrangling, OPEC on Wednesday agreed to revise its complex output targets and said the move would effectively cut supplies by half a million barrels per day (bpd).
Ministers of the Organization of the Petroleum Exporting Countries (OPEC) had been widely expected to stick to existing production allocations, which have been in place all year.
But they had voiced concern about a growing surplus of oil on the market and prices on Tuesday sank to a five-month low below $102 a barrel, around 30 percent below a record hit in July above $147.
The market rallied by a dollar after OPEC's announcement.
OPEC President Chakib Khelil said the decision amounted to a cut from the group's July output.
"I think if you do your own calculation properly, it will be a lowering of production by about 520,000 barrels per day," Khelil said.
OPEC's new production ceiling is 28.8 million bpd, compared with its earlier target of 29.67 million bpd.
The target was revised on the basis that Indonesia has just left OPEC and Angola and Ecuador have joined over the past two years.
Khelil's estimation of how much output will be removed from the market was based on amounts OPEC members were really producing, rather than agreed levels.
OPEC was estimated to be pumping roughly 790,000 barrels per day bpd above target.
"The market was expecting OPEC to maintain quota, but unofficially change production," said Tony Nunan of Mitsubishi Corp. "I didn't expect the organization to come out and officially say that they had cut."
HUNDRED DOLLAR TARGET?
Ahead of the OPEC meeting, ministers had appeared to be in broad agreement that around $100 a barrel was a reasonable crude price, but there was no need for action yet to support that level.
Leading exporter Saudi Arabia, which has been responsible for up to 750,000 bpd of production above official targets, said the market was balanced.
In the run-up to July's record high price, the kingdom hosted an energy meeting in Jeddah at which it announced a unilateral output increase.
"The market is fairly well-balanced and we have worked very hard since the June meeting to bring prices to where they are now. I think we have been very successful," Naimi told reporters on arrival in Vienna.
Even Venezuela and Iran, which have big-spending, populist governments and are especially in need of high oil prices, had stopped short of outright calls for a cut.
"We need to be careful that there won't be a price collapse but that is something that does not look probable," Venezuelan Energy and Mines Minister Rafael Ramirez told reporters.
The group next meets in December in Algeria by which time, OPEC could be facing a bigger supply build.
Khelil, who will host the meeting said the surplus could be anything from half a million to 1.5 million bpd.
Ministers of the Organization of the Petroleum Exporting Countries (OPEC) had been widely expected to stick to existing production allocations, which have been in place all year.
But they had voiced concern about a growing surplus of oil on the market and prices on Tuesday sank to a five-month low below $102 a barrel, around 30 percent below a record hit in July above $147.
The market rallied by a dollar after OPEC's announcement.
OPEC President Chakib Khelil said the decision amounted to a cut from the group's July output.
"I think if you do your own calculation properly, it will be a lowering of production by about 520,000 barrels per day," Khelil said.
OPEC's new production ceiling is 28.8 million bpd, compared with its earlier target of 29.67 million bpd.
The target was revised on the basis that Indonesia has just left OPEC and Angola and Ecuador have joined over the past two years.
Khelil's estimation of how much output will be removed from the market was based on amounts OPEC members were really producing, rather than agreed levels.
OPEC was estimated to be pumping roughly 790,000 barrels per day bpd above target.
"The market was expecting OPEC to maintain quota, but unofficially change production," said Tony Nunan of Mitsubishi Corp. "I didn't expect the organization to come out and officially say that they had cut."
HUNDRED DOLLAR TARGET?
Ahead of the OPEC meeting, ministers had appeared to be in broad agreement that around $100 a barrel was a reasonable crude price, but there was no need for action yet to support that level.
Leading exporter Saudi Arabia, which has been responsible for up to 750,000 bpd of production above official targets, said the market was balanced.
In the run-up to July's record high price, the kingdom hosted an energy meeting in Jeddah at which it announced a unilateral output increase.
"The market is fairly well-balanced and we have worked very hard since the June meeting to bring prices to where they are now. I think we have been very successful," Naimi told reporters on arrival in Vienna.
Even Venezuela and Iran, which have big-spending, populist governments and are especially in need of high oil prices, had stopped short of outright calls for a cut.
"We need to be careful that there won't be a price collapse but that is something that does not look probable," Venezuelan Energy and Mines Minister Rafael Ramirez told reporters.
The group next meets in December in Algeria by which time, OPEC could be facing a bigger supply build.
Khelil, who will host the meeting said the surplus could be anything from half a million to 1.5 million bpd.
