The Organization of the Petroleum Exporting Countries said Thursday that it would take 500,000 barrels a day off the market beginning in February, cementing its apparent intention to keep oil prices around $60 a barrel.
The cartel, which pumps more than a third of the world's crude oil, helped stabilize falling oil prices in October, when it announced a cut of 1.2 million barrels a day to 26.3 million barrels. But expectations of slower economic growth and a non-OPEC supply surge in 2007 meant the market was still vulnerable to a price collapse.
To prevent that, OPEC sent a clear signal to the market, and energy traders reacted. In New York futures trading, gasoline shot up by almost 5 cents and heating oil by more than 4 cents to $1.665 and $1.777 a gallon, respectively, and benchmark crude rose $1.14 to $62.51 a barrel.
Analyst Ann-Louise Hittle of market research firm Wood Mackenzie described OPEC's action as "an aggressive approach" intended to put a floor underneath prices.
By delaying the cut until February, however, the cartel left itself a window to change its mind if demand jumps because of a colder-than-expected winter or a stronger economy.
Saudi Oil Minister Ali Ibrahim Naimi said the price of crude didn't figure in the decision. "What we're working towards is to rebalance the market and this decision does this," he said.
Despite such sentiments and although the planned cuts were two months away, consumers could feel the bite soon.
OPEC's decision reflected fears that the level of oil inventories in the U.S. and other large consuming nations remains too high.
Also Thursday, OPEC approved Angola as the 12th member of the organization. OPEC President Edmund Daukoru said Angola would join the group Jan. 1 but would not participate in the February cuts.