Source: NYTimes.com

In an unexpected decision made after a six-hour meeting that lasted well into the night, the OPEC oil cartel said it would reduce its oil production by about half a million barrels a day in a bid to stem a rapid decline in oil prices in recent weeks.

The outcome of the meeting, which ended around 3 a.m. Wednesday, represented a significant loss for moderate OPEC producers like Saudi Arabia, which had argued for the group to keep producing at full tilt.

But fears that the market was currently oversupplied while demand for oil was slowing led the group to say it would “strictly comply” with production quotas set in September 2007. Since then, the group has been producing above those levels to drive prices down.

The outcome was presented as a technical adjustment to curb the group’s overproduction, but OPEC’s president, Chakib Khelil, said the decision meant that OPEC producers would effectively reduce their overall production by 520,000 barrels a day. Oil prices traded electronically in New York jumped $2 a barrel after the decision.In its final statement, the oil-producing group said it had noted “a shift in market sentiment causing downside risks to the global oil market outlook.”

Given OPEC members’ history of frequently pumping more than their quotas, it is not certain that they will abide by the new agreement.

Ali Al-Naimi, the oil minister of Saudi Arabia, which has been pumping more than its quota in recent months, left the meeting without any comment. With crude oil heading down toward $100 a barrel, Saudi Arabia and other producers meeting here on Tuesday had suggested that OPEC would keep pumping at full tilt, even as some members of the cartel expressed concerns about rapidly declining prices.

Members of the Organization of the Petroleum Exporting Countries account for 40 percent of the world’s oil exports. They had scheduled the late-night session to consider how to respond to a 30 percent drop in oil prices since July. Crude oil fell more than $3 a barrel on Tuesday.

Ahead of the meeting, the cartel’s members appeared deeply split, with one camp, led by Iran and Venezuela, advocating reductions in output to stem further price declines, and another, led by Saudi Arabia, wishing to allow prices to fall further.

As the group’s representatives arrived in Vienna, Mr. Khelil, who is also Algeria’s oil minister, said the cartel would probably keep production unchanged. At a news conference held after the meeting, Mr. Khelil said the group was merely responding to oversupply in the market.

“My hunch is that prices will be going down despite the decision,” Mr. Khelil said. “There is an oversupply; everybody agrees about this.”

The decision represents a rare case of OPEC’s going against the position of its biggest member, Saudi Arabia. The Saudi oil minister had said when he arrived in Vienna early Tuesday that the market was “fairly well balanced.”

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