OPEC oil ministers approved a new production accord Monday that will sharply cut their output and raise crude oil prices.
Saudi Arabia's oil minister, Hisham Nazer, emerged from a session of the Organization of Petroleum Exporting Countries and said the deal was formally completed.All 13 members of the cartel signed the accord, which sets a target price of $18 a barrel although crude has been selling at $14 a barrel and less.
Saudi Arabia had tried to set a minimum price of $15 in the accord, but that effort met resistance.
Analysts have said the agreement, which goes into effect Jan. 1 and runs for six months, could send crude prices climbing by $1 or $2 a barrel.
Each $1 rise in the price of crude oil theoretically means an increase of 2.5 cents a gallon in retail gasoline prices, although oil companies do not always pass along the full increase.
The agreement sets the cartel's total production at 18.5 million barrels a day in the first six months of the year. It currently is running at 22.5 million barrels a day.
The ministers' aim is to curtail their production in an effort to reduce the glut on the market and lift sagging prices.
Nazer said late Sunday the Saudi proposal was designed to prevent prices from falling below $15. But other ministers said the minimum price could become the ceiling price.
Under the accord, each country would be given a production quota, or ceiling, within the total limit of 18.5 million barrels a day.
Many OPEC countries need more money from their oil sales. Iran and Iraq want additional revenues to rebuild their economies, which were badly damaged in their eight-year war. They agreed to an August cease-fire.
Under the new agreement, Iran and Iraq each will get the same quota of 2.64 million barrels a day.
Iraq had been demanding an equal production ceiling with Iran, which repeatedly said no.
Under the new accord, Iran will retain its production share at 14.27 percent of the cartel's total output. Other countries would give up some of their share to bring Iraq up to the same level as Iran.
Saudi Arabia maintains the largest share at about a quarter of OPEC's total output.
Under the current accord, Iran has a cap of 2.4 million barrels a day. Iraq was given a ceiling of 1.5 million barrels but ignored it. Analysts estimate its production at 2.7 million barrels a day.