OPEC plans to shave its output by 2%, or 500,000 barrels a day, in February in the second production cut decision in two months. The decision, which was made despite the fact that commercial inventories are down around the world, suggests that the oil cartel is determined to aggressively defend a $60 floor on the oil price. That price fell from a July high of $77 to $55 in the fall, reflecting the easing of tensions over Iran's nuclear program and the mild hurricane season. The price has stabilized at about $61, however, since the October production cut of 1.2 million barrels a day. Front-month New York light sweet crude contracts for January delivery are up $0.31 to $62.80 a barrel this morning after rising $1.14 to settle at $62.51 yesterday. OPEC's determination to maintain the $60 floor creates the possibility that consumers will reduce consumption, but the cartel apparently believes that is a risk worth taking -- particularly as the winter months are the time when consumption is generally highest. In addition to deciding on the February cut, OPEC has accepted Angola, Africa's fastest-growing oil exporter, as its first new member in 31 years.
• Sources: New York Times, Bloomberg, Reuters, Forbes
• Related commentary: OPEC Cuts Production: Crude Prices May Still Fall, Oil Traders Testing the OPEC Cartel, Oil Rises to Over $60/Barrel on OPEC Production Cut, OPEC Waffles on Production Cut
• Potentially impacted ETFs: Oil Service HOLDRS (NYSEARCA:OIH), United States Oil Fund LP (NYSEARCA:USO)
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