(AFP) – Sep 9, 2008

VIENNA (AFP) — Oil prices rebounded back above 100 dollars on Wednesday after OPEC agreed to cut its output by half a million barrels a day to stem "dramatic" falls in the market.

Faced with weakening global economic growth and fears of over-supply, the cartel opted to rein in overproduction by members, with the bulk of the cuts expected to be shouldered by Saudi Arabia. Official quotas were unchanged.

The ultimate impact on the market will depend on the discipline of members in reducing their output to levels specified in their official quotas, analysts believe.

Oil prices topped a record 147 dollars in July but have since fallen some 30 percent to just above 100 dollars as the global economy has slowed sharply.

"The market was coming down very dramatically. I hope it will relax now," said OPEC Secretary General Abdullah al-Badri on Wednesday after the marathon meeting, which broke up at 3:00 am local time (0100 GMT).

The Organisation of Petroleum Exporting Countries has had bitter experience in the past with creating a glut of oil on the market as global economic growth falters.

The group is said to be haunted by the "ghost of Jakarta" after a decision to increase production at a meeting in the Indonesian capital in November 1997 as the Asian financial crisis erupted.

That crisis slashed economic growth and oil prices dropped from 20 dollars a barrel at the time to a low of 8.0 dollars in early 1999.

Today, global economic growth is also skidding, with the US economy slowing, Europe said to be skirting with recession and even the dynamic economies of Asia showing signs of strain.

Badri noted that OPEC countries exceeded their official quota by 900,000 barrels per day (bpd) in July.

Taking into account under-producing countries, this meant OPEC had overproduced 520,000 bpd that month and it is this excess oil which will now be eliminated.

"We have been adding more crude to the market than we should ... We're asking that those who overproduce go back to their production allocation," he said.

Meanwhile, the International Energy Agency (IEA) cut its estimate for global oil demand this year and next on Wednesday, saying consumers, mainly in the United States, are changing their lifestyles in response to high prices.

The IEA, the industrialised world's energy watchdog, had urged OPEC to keep its output unchanged before the meeting. US Energy Secretary Samuel Bodman asked producers to keep oil markets well supplied on Tuesday.

The OPEC gathering has cast a spotlight on the minimum price for oil desired by the cartel, which pumps 40 percent of world crude.

Iran and Venezuela have identified 100 dollars as their floor, Ecuador has referred to 110-120 dollars as "reasonable," while analysts see Saudi Arabia and other Gulf states as being comfortable with a figure of 80-90 dollars.

Badri insisted that OPEC was not trying to fix a 100-dollar threshold.

"We don't want to see prices drop dramatically," he said, adding: "I assure you we did not discuss any price tag at all."

On the oil market Wednesday, Brent North Sea crude for delivery in October stood at 100.77 dollars a barrel, a rise of 43 cents from Tuesday's close. Brent had dropped to as low as 98.89 dollars in Asian trade on Wednesday prior to the OPEC decision.

New York's main contract, light sweet crude for October, stood eight cents higher at 103.34 dollars following the IEA report, which was said to be negative for oil prices.

Explaining its decision Wednesday, OPEC identified a shift in sentiment in the oil market linked to falling economic growth, a strengthening dollar, easing geopolitical tensions and greater supply.

"All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook," it said.

A statement from OPEC also said Angola would hold the presidency pf the organisation from the beginning of 2009.

The departure of Indonesia, announced at the meeting, reduces OPEC's membership at 12 nations and the group's official output ceiling was accordingly restated at 28.8 million bpd, down from 29.67 million bpd.

The next meeting of the organisation will be in Oran, Algeria, on December 17.

Russian Vice Premier Igor Sechin reached out to OPEC late Tuesday, calling for greater cooperation between the cartel and his country, the world's biggest non-OPEC oil producer.

"Cooperation with OPEC is one of the priorities of Russia," he said, according to a statement read out at the opening of the meeting.

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