OPEC to cut oil output by 500,000 bpd from February 1

Mumbai: The Organisation of Petroleum Exporting Countries (OPEC) has agreed to cut oil output by 500,000 barrels a day, or two per cent, latest by February 1 when the northern winter ends, a delegate said.

OPEC, which pumps overt a third of the world's oil output, has already slashed production by 1.2-billion barrels per day to 26.3-billion bpd in October.

The news sent oil prices soaring by over a dollar in Western markets. US oil was up $1.00 at $62.37 at 1204 GMT, having hit a session high of $62.72 following the news.

Oil has fallen from a mid-July peak of $78.40 and is ruling around $60 a barrel, but is still three times the price at the start of 2002 as Asian demand, particularly from China and India rose. Refining constraints and worries over supply from Iraq, Nigeria, Iran and Russia have also aided a fuel price rally.

OPEC said it postponed a further reduction until peak demand has passed in order to address concerns of importer nations that a cut now will drive prices higher and hurt their economies.

Crude stocks with the OECD group of industrialised countries fell 40 million barrels in October and the trend continued in November, the International Energy Agency (IEA) said.

OPEC ministers were of the view that the market is oversupplied with stocks in the US, the top consumer, at the highest since 1998 for this time of year. However, they feared a cut too soon could spike prices while a delay could push prices down sharply in the second quarter as demand slackens.