FUEL OPEC agrees to lower production ceiling

OPEC is aiming to avoid a big drop in oil prices.
VIENNA, Austria (AP) -- OPEC agreed today to follow through on an earlier pledge to cut its oil production target by 4 percent starting in April despite recent high prices of crude, several oil ministers said.
The Organization of Petroleum Exporting Countries, which pumps about a third of the world's oil, will reduce its output ceiling by 1 million barrels per day. A recent surge in oil prices had led some of the group's 11 members to suggest postponing the cut, but OPEC's most influential oil minister, Saudi Arabia's Ali Naimi, prevailed in his effort to press ahead.
Confirming agreement
Kuwait's oil minister Ahmad Fahad Al-Ahmad Al-Sabah, who had suggested delaying a cut, was among those who confirmed the group's decision.
Ministers from Algeria, Nigeria, Libya and Qatar also confirmed the agreement, reached in private talks ahead of a formal meeting at OPEC's headquarters in Vienna.
The 11-member Organization of Petroleum Exporting Countries decided in February to reduce its output target by 1 million barrels per day starting Thursday.
OPEC supplies about a third of the world's oil. Its current output target is 24.5 million barrels per day. Naimi argued that the group can't be blamed for the high prices, saying investors and speculators have boosted the prices to their highest levels since the 1991 Gulf War.
Careful balance
As the group sets its policy today, it must carefully balance consumers' need for lower prices with its member countries' fears that increasing stocks and a seasonal lull in demand could reduce prices too much.
Abdullah bin Hamad al-Attiya of Qatar said OPEC is "trying to avoid a [price] shock."
"We don't want to wake up with a disaster," he said.
As the group follows through on its Feb. 10 agreement to cut its production target to 23.5 million barrels, it risks driving up crude prices toward the psychologically important threshold of $40 per barrel. That could damage the global economy and the long-term demand for oil, said John Waterlow, an analyst at Wood Mackenzie Consultants in Edinburgh, Scotland.
However, if the group had postponed its promised cut, it could have hurt its credibility and oversupplied the market just as demand starts to slow in the second quarter. The result could be "a precipitous fall" in prices that OPEC wants to avoid, Waterlow said.