OPEC confirms cut, oil futures up

OPEC confirms cut, oil futures up

Reuters, London

Oil prices pushed closer towards US$21 a barrel on Friday after OPEC announced it would cut supply by 1.5 million barrels per day (bpd) from Jan. 1.

February Brent crude oil futures stood 42 cents up at $20.76 a barrel after OPEC producers on Friday tightened the screw on oil supplies in a pact with independent exporters that cuts world production by nearly two million barrels daily.

The cartel agreed to cut output by 6.5 percent after winning pledges from five non-OPEC nations to shave 462,500 bpd.

The curbs were imposed for six months although ministers are set to meet again in mid-March to review policy.

OPEC is aiming to lift prices back towards the bottom end of its preferred $22-$28 target range, equivalent to about $24-$30 for Brent.

It successfully defended that high price band for 18 months until the Sept. 11 attacks in the United States signalled a further deterioration in the ailing world economy.

Analysts said the cartel's alliance with non-OPEC could spell bad news for industrialised petroleum importing nations struggling to combat recession and which had found some help in recent months from lower energy costs.

But they said compliance and implementation of the new production quotas remained the key watch words.

Saudi Arabian Oil MInister Ali al-Naimi said Riyadh would set an example by immediately lowering crude sales in line with its new OPEC quota.

Other big suppliers, the United Arab Emirates and Iran said they would do their best to immediately comply.

Saudi Arabia has already trimmed its January crude allocations to most international majors, market sources said early this month.