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OPEC to cut output

DUBAI: Aiming to stem the decline in oil prices, the Organisation of Petroleum Exporting Countries (OPEC) has decided to slash its daily output by 1.5 million barrels.

The decision was taken during an OPEC meeting in Vienna on Friday. It was not clear when the cut would come into force. Saudi Arabia’s Oil Minister Ali Naimi said the new measure would come into effect on November 1. Some members said the decision would be enforced immediately.

OPEC meets nearly 40 per cent of the world’s daily demand of 87 million barrels. It is estimated Saudi Arabia would now lower its daily production by 4,66,000 barrels, the highest among OPEC members.

Analysts point out it is not necessary that the cutback in production would raise oil prices, which have declined substantially after reaching a per barrel high of $147.27 in mid-July.

Two major factors are apparently hampering resurgence in prices. First, the heightened value of the dollar over the last one month is imposing a downward pressure on prices. Second, despite the cutback, there are fears that the global demand of oil would be weak, in anticipation of a worldwide economic slowdown.

Oil prices sank to their lowest point since May 2007, reaching a low of $63 after OPEC announced its decision. Mr. Naimi was non-committal on whether further production cuts were possible in case oil prices failed to rise. However, he said all options were open between now and December, when OPEC reassembles in Algeria.

Earlier, OPEC President Chakib Khelil had said the cartel intended to stabilise oil prices between $70-90 a barrel.

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