OPEC Agrees to Cut Production Quotas

Click here to write a Letter to the Editor.

he OPEC oil cartel on Wednesday agreed to move ahead with its Feb. 10 decision to lower oil production quotas by 1 million barrels to 23.5 million barrels a day.

The reduction is set to begin on Thursday and threatens to send motor fuel prices in the United States higher, Bloomberg said.

Oil prices in New York this year have risen 12% as demand from China and the United States rose and OPEC planned to reduce supplies, Bloomberg said. Domestic gasoline prices reached a record $1.758 a gallon on Monday, the Department of Energy said.

Despite the high prices, ministers from OPEC members including Saudi Arabia and Algeria have expressed concern that oil prices may decline in the next three months as demand slows with warmer weather in the Northern Hemisphere.

Kuwait's minister for two days had called on OPEC to postpone the oil cuts until June because of rising prices, Bloomberg said. But other ministers said oil is rising because of speculation in the market and not because of shortages.

Among the 19 oil analysts surveyed by Bloomberg last week, a majority said they expected OPEC would proceed with quota cuts, then ignore the accord.

The 10 members with quotas are likely to produce 25.7 million barrels a day in March, little changed from February, and 1.2 million barrels a day above the group's self-imposed quota, according to consultant PetroLogistics Ltd.

11301