After hours of wrangling, the Organization of the Petroleum Exporting Countries (OPEC) on Wednesday agreed to revise its complex output targets and said the move would effectively cut supplies by half a million barrels per day (bpd). Ministers of OPEC had been widely expected to stick to existing production allocations, which have been in place all year. But some voiced concern about a growing surplus of oil on the market and prices on Tuesday sank to a five-month low below $102 a barrel, around 30 percent below a record hit in July above $147. US crude was trading 65 cents higher at $103.90 at 0913 GMT. The price had risen by a dollar immediately after OPEC's announcement. OPEC President Chakib Khelil said Wednesday's decision amounted to a cut from the group's actual July output. “I think if you do your own calculation properly, it will be a lowering of production by about 520,000 barrels per day,” Khelil said. His estimation of how much output will be removed from the market derived from amounts OPEC members were really producing, rather than agreed limits. OPEC's new production ceiling is 28.8 million bpd, compared with its earlier target of 29.67 million bpd, ministers said. They seized the opportunity of Indonesia's decision to suspend its membership to the group to adjust targets and give allocations to Angola and Ecuador, which have joined over the past two years. The producer group's output targets have long been opaque and analysts interpreted the decision as keeping existing allocations intact, while calling for tighter compliance. “The communique is much as expected,” said Paul Horsnell of Barclays Capital. “However, it also talks of strictly adhering to quotas, when we might have expected the trimming back in coming months to be done more discreetly.” Others agreed the surprise was that OPEC has made public its intention to remove supply above agreed limits. “The statement is clear as mud, but really what it says is members should keep to quota, which basically means Saudi Arabia should stop the additional barrels that it has provided over the summer, which was somehow expected,” said Olivier Jakob of Petromatrix. “I would say it's only half of a surprise because they have made a formal announcement.” OPEC was estimated to be pumping roughly 790,000 bpd above target.
