OPEC Cuts Official Oil Output by 4 Percent

OPEC Cuts Official Oil Output by 4%

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Members of the Organization of Petroleum Exporting Countries (OPEC) agreed on Saturday to cut oil output for the second time this year, in hopes of boosting slumping crude prices.

Oil ministers of OPEC members ratified after two days of talks an agreement to reduce output by four percent, or 1 million barrels per day (bpd), to 24.2 million bpd. The cut takes effect on April 1.

"The present weaker world economy and the traditional sharp downturn in demand associated with the second quarter both clearly point to the need for a correction in oil supply, and the conference has taken the decision to stabilize the oil market," OPEC said in a communique.

"Having reviewed the current market situation, the conference agreed to reduce production," it said.

"This agreement will keep prices at US$25 for the medium time," OPEC President Chakib Khelil said at the end of the talks.

Markets closed a little higher Saturday on OPEC's decision, with contracts of light, sweet crude for April delivery closing at US$26.74 a barrel, up 19 cents, on the New York Mercantile Exchange, and contracts of North Sea Brent crude ending 4 cents higher at US$25.05 on the International Petroleum Exchange in London.

Analysts said OPEC's decision might cause a short-term rebound in oil prices, now below US$23 per barrel. But they also warned that the move could fuel an economic slowdown in industrialized countries, already nervous at the slowdown in the U. S. economy.

OPEC already had curtailed supplies by 1.5 million bpd in January to counter a downturn in demand at the end of the northern hemisphere winter.