LONDON (CNNfn) - OPEC oil producers Tuesday agreed upon stringent new export limits to end a year-long glut and lift oil prices from one of the biggest slumps on record.
Ministers endorsed prearranged output curbs of 7 percent, removing just over 1.7 million barrels a day from a saturated world market.
Saudi Oil Minister Ali al-Naimi said the new restrictions were aimed at lifting oil prices back to $18 a barrel.
"This particular decision was geared to reducing the surplus inventory and the fact that it is going to last a year guarantees elimination of any glut on the market," Naimi said after signing the accord.
Oil prices have rebounded dramatically ever since the announcement of the so-called Hague pact.
Analysts say the markets have sensed that the world's major oil producers, anxious never to see a repeat of $10-a-barrel oil prices, may finally have the resolve to overcome past differences and reduce output.
On Tuesday, the price of benchmark North Brent crude for May delivery was down 11 cents at $13.77 a barrel in London trading. The price of West Texas intermediate crude for May delivery was down 19 cents at $15.55 a barrel on the New York Mercantile Exchange.
Oil analysts say the cutbacks may quickly be felt at the pump in the United States, where prices could begin to rise by this summer.
In Europe, however, the hikes are likely to be less acutely felt due to high retail taxes, according to Julian Lee, of the London-based Center for Global Energy Studies.
Two previous attempts
The Organization of the Petroleum Exporting Countries last year twice failed with production cuts to drain stockpiles. Now it is confident the worst is over after a price plunge wiped $50 billion in 1998 from its export revenues.
"Nobody wants to see $10 oil again," said Qatari Oil Minister Abdullah al-Attiyah. "I think everybody has learned their lesson from last year."
Analysts warned that a sustained oil price recovery would depend on tight producer compliance with the cuts.
"If OPEC honors the commitment, and it's a big 'if', the price of oil will continue to stabilize between $15 and $17 a barrel," former Saudi Oil Minister Zaki Yamani said. "Some of them, when they see the price becoming acceptable, they start cheating."
"The key to the success of this agreement is its sticking power," agreed Mehdi Varzi of finance house Dresdner Kleinwort Benson. "If they get 75 percent compliance it's very good news for oil prices."
OPEC's chances of finally erasing a towering petroleum stockpile seem to have improved with the settlement of last year's squabbles over slack adherence to output limits.
The new curbs were first negotiated by five key producers in The Hague on March 12. Non-OPEC Mexico, Norway, Oman and Russia have promised their cooperation and will take total new curbs to 2.1 million barrels daily.
Many of the exporters have already informed their customers of lower April supplies.
Higher oil prices will come as a welcome relief to oil companies which have seen profits slump, forcing them to cut jobs and capital spending.
"These are significant cuts. The real effect will be felt around the end of May and we're expecting inventory data to contribute to a strong third quarter for oil companies," said Barney Gray of Williams de Broe in London. "If we're anywhere near $15 by midyear, company cash flow increases significantly and you're going to see a lot of improvement."
The new output limits mean OPEC, in control of more than half the world's oil trade, will have removed more than 4 million barrels a day in a year, a 16 percent cut.
--from staff and wire reports