World

OPEC output to be cut today

VIENNA, Austria - With fuel costs already at uncomfortable levels for consumers, OPEC took a step that could push prices even higher by announcing Wednesday that it would cut its crude oil production target by 4 percent. The Organization of Petroleum Exporting Countries hopes the cut, which takes effect today, will prevent a slide in prices this spring, when the global demand for oil usually slips to a seasonal low. Some analysts said the cut could soon push crude prices above the psychologically important threshold of $40 per barrel. The decision could also worsen the pain for U.S. motorists, who have been paying the highest prices in recent years for gasoline. OPEC, which pumps about a third of the world's oil, agreed in talks at its headquarters in Vienna to reduce its output target by 1 million barrels per day. Although it had announced plans for the cut when its members met last month in Algiers, Algeria, a subsequent surge in prices led a few of the group's 11 members to suggest postponing the decrease. OPEC had to balance concerns that high prices could choke off economic growth with its own fears that swelling inventories and a seasonal lull in springtime demand could cause prices to plunge. Kuwait and the United Arab Emirates proposed postponing the cut, but Saudi Arabian Oil Minister Ali Naimi and the majority of ministers prevailed in their effort to press ahead and reduce the ceiling to 23.5 million barrels per day. These ministers blamed speculators for much of the froth in prices and argued that the weak U.S. dollar was adding to the problem. Oil is bought and sold in dollars, and the recent decline in the dollar has caused the nominal oil price to rise. Futures markets, which rose sharply Tuesday on signals that OPEC would lower its output ceiling, responded to the official announcement with a sell-off as traders liquidated their long contracts and took profits. Carl Larry, an analyst at ABN Amro in New York, said this reaction proved that OPEC was at least partly correct in attributing some of the high crude prices to "speculative money." However, some analysts argued that prices would soon begin to rise again, especially if OPEC showed that it was determined to curtail its actual output and not just reduce its production target. U.S. crude could spike to $40 a barrel "within a week or two," Larry said. President Bush expressed disappointment Wednesday at OPEC's oil output cut and pressed allies inside and outside the cartel to fill any gap in supply to prevent higher prices after Democratic rival John Kerry accused Bush of ignoring record pump prices.