Opec move sees oil price rise above $100

The price of Brent crude climbed back above US$100 a barrel today after traders reacted to Opec's decision to cut excess supply.

The cartel, which concluded a meeting in Vienna early today, said it would produce 28.8 million barrels a day, consistent with levels agreed in September last year.

The outcome effectively meant member countries had agreed to cut back 520,000 barrels a day of excess production. Countries regularly produce oil above the organisation's overall quota to maximise revenues.

The deal is seen as a compromise to avoid new turmoil in crude markets while seeking to prevent oil prices from falling too far.

October Brent crude was trading at $101.27, slightly up after having fallen below $100 for the first time since the beginning of April.

Light, sweet crude traded on the New York Mercantile Exchange - the world's benchmark price - was just above $104 today, a level also not seen since early April. It had dipped to $102 earlier in the session.

The New York price has dropped nearly 30% from the $147 high seen in July as projections of slower global economic growth dampened demand, and there were fears Opec could cut production quotas to shore up prices.

In its statement, Opec said the oil market was "well supplied" and that had enabled inventories "to be built up to comfortable levels in terms of forward demand cover".

The 13-nation organisation - whose members include Saudi Arabia, Iran, Venezuela and Nigeria - wants to avoid oil prices falling rapidly as that would cause headaches for oil industry investment. Oil costs as much as $50 a barrel to produce.

Energy analyst John Hall, of John Hall Associates, said he thought prices could now head up back to the $110 a barrel mark in the coming months as a result of the meeting.

He said: "By allowing the price of oil to rise too quickly to unrealistic levels during this year already, Opec has jeopardised price stability and will now have to be very careful to balance supply and demand and try to keep price levels acceptable to both producers and consumers."

Mr Hall added: "There's a general feeling that it's Opec's fault that oil prices are so high. It would have been a bad step to reduce output in the current climate."

Opec's meeting finished as the International Energy Agency (IAE) lowered its global oil demand forecast for both this year and 2009 to reflect slower economic growth.

The IAE said OECD countries would use 48.4 million barrels per day this year, down from a prediction of 48.6 million made last month, falling to 47.9 million barrels in 2009.

Opec nations have around two-thirds of the world's known oil reserves, and account for 40% of the world's oil production.