OPEC oil producers today agreed to stamp out excess supply that has lowered world prices from record highs. Ministers said they would withdraw one million barrels daily of production - around 3.5 per cent of current supply - from January 1st and meet again on January 30th to discuss whether further cuts were necessary.
"Stocks are building up at a unreasonable rate, This is a preventative measure. It is enough to sharpen the market," said Algerian Energy Minister Mr Chakib Khelil.
The decision will disappoint consumer nations which have urged OPEC not to pull back from a surge in production, saying oil inventories must rebuild to underpin economic growth and calm volatile prices.
Prices are still around 30 per cent above the start of the year although US crude has dropped by nearly $13 from a record high of $55.67 a barrel in late October.
OPEC is cutting back in the heart of the northern winter, when heating demand peaks. Although heating stocks in major consuming centres are low, only sustained severe weather would put real strain on supply, analysts said.
"It seems like they've done enough to stabilise prices at current levels. I don't think they've done anything dangerous to the market," said Mr Adam Sieminski of Deutsche Bank in London. US crude was down 23 cents at $42.30 a barrel today.