OPEC to Cut Production

V I E N N A, Jan. 17 -- OPEC oil ministers agreed to a deal to cut oil production by 1.5 million bpd (barrels per day).

Some hawks in the 11-nation Organization of Petroleum Exporting countries, which controls around a fifth of world supplies, had been advocating a bigger cut still.

But after a series of bilateral meetings Tuesday in luxury hotel suites across Vienna, hawks like Qatar and Iran — who wanted a 2 million bpd reduction — were ready to accept a lower figure.

"The cut is not going to have a negative impact on consumers," said Leo Drollas, chief of the London-based Centre for Global Energy Strategies. "It's not too bad. It could have been worse."

The United States and the European Union had urged producersto make only a modest reduction.

After the deal U.S. light crude eased 54 cents a barrel to$29.75. London Brent blend lost 51 cents to $25.00.

"This agreement will keep oil prices stable and not harmproducers or consumers," said Libya's OPEC representative AhmedAbdulkarim.

Aim to Control Prices

OPEC Secretary-General Ali Rodriguez said the group had beendetermined to stem a swift decline in oil prices from a recent10-year high of $35.

"Stocks are increasing and in the second quarter we saw asharp fall in prices coming," he said. "We wanted to maintainthe stability of the market and of course of prices."

Saudi Arabia's powerful oil minister Ali Naimi said at the end of the afternoon Tuesday that consensus had been reached on the 1.5 million bpd figure. The figure was "not out of the blue," he said. "It takes into account a lot of variables."

Iraqi Ban Affecting Market

There also appears to be agreement on how to cover the shortfall caused by Iraq's current ban on oil exports. Until they come back into the market, other countries will fill their quota. Iraq's oil minister is not attending the meeting. He had previously demanded a 3 million bpd cut.

OPEC wants to cut now because it fears that if it waits until its next regular meeting in March excess oil will be flooding the market as demand falls in the spring, sending the price plummeting again.