Surprise cut in Opec production sends oil price above $30

The oil producers' cartel Opec yesterday announced a surprise cut in supplies from April, propelling oil prices above $30 and sparking a warning from the United States not to hurt economic growth.

Ministers from the 11 member nations agreed to cut production by 4 per cent, or a million barrels a day, to 23.5 million barrels from 1 April.

They also pledged to eliminate 1.5 million barrels a day of "leakage" being pumped above existing supply quotas.

Oil prices rose on the news - a repeat of last September's unexpected supply reduction. In London, Brent crude ended up 89 cents at $30 a barrel while in the US prices of light crude were up $1.20 at $33.85.

Saudi Arabia said action was needed to prevent a price crash as demand slackened and world oil stocks built up after the northern hemisphere winter. Its oil minister, Ali al-Naimi, said: "The inventory, where it is now, is fine. We don't want to see it building. We don't want to see a precipitous fall in prices."

Opec last year announced a price target of $22 to $28 for a basket of different world oil prices - giving a mid-point of $25 - although Iran yesterday said it wanted the target switched to $25 to $28. "Doing what they've done today clearly shows they want to support a $28 basket, rather than $25," Nauman Barakat at the broker Refco in New York said. A White House spokesman said: "It is our hope that producers do not take actions that undermine the American economy ... and American consumers."

The International Energy Agency, which advises on energy to 26 industrialised nations, provided Opec with plenty of ammunition for its decision. It is forecasting that demand will undercut world supply in the second quarter by as much as 4 million barrels a day, more than double the normal seasonal gap.