OPEC oil producers on Wednesday agreed to their first new production limit in three years in a deal that settles a six-month-old argument over output levels in Saudi Arabia’s favour.
The Organization of Petroleum Exporting Countries agreed on a new supply target of 30 million barrels daily, Venezuelan Oil Minister Rafael Ramirez said, roughly in line with current production.
The agreement caps output for all 12 OPEC members for the first half of the year, keeping supply near three-year highs, enough to rebuild lean global inventories.
Higher supply from OPEC has kept a leash on oil prices, which traded at $108 a barrel for Brent crude oil on Wednesday, down from a year-high $127 in April.
When OPEC met in June, it failed to reach an agreement on a higher supplies, leaving Saudi Arabia free to open the taps to compensate for lost Libyan supply.
Riyadh says it pumped 10 million barrels a day last month, its highest in decades.
Iran,Venezuela and Algeria, all of whom already pump at full capacity, want to keep oil prices above $100 a barrel.
“We think the present level is appropriate for producers and consumers,” Algerian Oil Minister Youcef Yousfi said of prices.
The price hawks had sought a commitment from Saudi Arabia along with Kuwait and the United Arab Emirates to make room for the restoration of Libya’s supply so that collective production does not balloon over the course of 2012.
Saudi Arabia and other gulf producers would prefer lower prices to help nurture global economic growth. The UAE said recently that $80 to $100 oil was preferable.
“Saudi Arabia is the central banker of the oil market and the decision that they will bring more oil to the market is definitely a good one,” said Fatih Birol, chief economist at consumer body the International Energy Agency.
With Libyan supplies post-civil war rising more quickly than expected, world oil inventories should increase if OPEC maintains output near current levels.
