OPEC cut boosts oil prices, may tighten market

London, Dec 14: OPEC's oil supply cut on Thursday sent crude oil prices a dollar higher above $62 a barrel and may set the stage for a tighter world market if the exporter group carries out the full reduction, analysts said.

OPEC, source of more than a third of the world's oil, decided to cut output by 500,000 barrels per day, or two percent, as of Feb. 1.

The organisation in October had cut supply from Nov. 1.

Iran and Venezuela, both members of the Organization of the Petroleum Exporting Countries, said they hoped the supply reduction would stabilise oil above $60, a level that puts consuming countries on edge.

Some analysts see prices heading still higher.

''We think the cuts that have already been made would already result in a significant tightening of the market,'' said Kevin Norrish, analyst at Barclays Capital in London.

''An additional cut coming in February would make the market look even tighter going forward and raise the upside potential.'' Barclays expects U.S. crude to average $76 a barrel next year, the most bullish prediction of more than 30 analysts regularly polled by Reuters. [O/POLL] U.S. crude was up $1.02 to $62.39 as of 1828 GMT. Its slide from a record high of $78.40 reached in July spurred OPEC to cut supply from Nov. 1 by 1.2 million bpd, its first cutback in two years.

Spike then Stabilise

Some OPEC ministers expected oil's rise to be short-lived following the decision.

''I expect prices to spike and then to stabilise,'' Algerian oil minister Chakib Khelil told reporters in Abuja.

Some analysts said the cutback would have a limited impact because of the delay in implementing it and since OPEC has yet to meet its last reduction fully.

According to Reuters estimates, OPEC has made good almost two thirds of the 1.2 million bpd cut pledged from Nov. 1. OPEC ministers put compliance much higher at above 80 percent.

''If there was a real cut implemented from now then fine, you could buy into the news,'' Olivier Jakob, managing director of Petromatrix in Zug, Switzerland.

''But they could not implement the previous one even though the price was below $60, so it's difficult to see that they will go ahead with additional cuts if we stay above $60.'' Oil consumers, as represented by the International Energy Agency, said the decision was ''unwelcome'' given high prices and the onset of peak winter fuel demand.

''There's no doubt the high oil prices are still causing a lot of strain on consumers, particularly in developing economies,'' said Lawrence Eagles, head of the agency's Oil Industry and Markets Division.

Reuters