Oil cartel OPEC decided to cut production by a greater-than-expected 1.2 million barrels a day on Friday, and some members indicated it was open to further cuts.
United Arab Emirates oil minister Mohammed bin Dhaen al-Hamili made the announcement at a news conference after OPEC's oil ministers held an emergency meeting in the capital of Qatar.
Support for the move by the de facto leader of the cartel, Saudi Arabia oil minister Ali Naimi, shows the group's unity on the issue of price, said one analyst after the announcement.
"If the market doesn't stabilize, they are going to continue to cut production," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "Prices from $57 to $60 is an area they are willing to defend."
Prices have declined more than 25 percent since mid-July. A barrel of light sweet crude rose 85 cents to $58.50 on the New York Mercantile Exchange Thursday before the announcement.
He did not specify the amount of production that each member country would cut, but said the reductions will affect all countries except Iraq. It is to take effect Nov. 1.
The cuts will come from actual production levels, he said, and are more than 1 million barrels a day being called for earlier by cartel members.
The cuts are the first time OPEC has trimmed its output since December 2004, when oil traded slightly above US$40 a barrel and the cartel lowered its official production quota by 1 million barrels a day.
However, many observers expect further production cuts in the near future.
Michael Fitzpatrick, a New York-based oil broker at Fimat USA, said "I'm not sure that a million barrels is going to be enough" of a cut to keep oil prices from further declines.
Qatar's Energy Minister Abdullah bin Hamid Al-Attiyah said the cartel's members are not excluding making further cuts.
Asked whether another cut could come in December, he said, "Everything is possible. We are working with the market and it is an open market."
Al-Hamili echoed the possibility, saying "We will monitor the market and review the situation and take a decision accordingly."
OPEC is scheduled to meet again in December in Nigeria and many analysts believe a further cut could be implemented then. "They better act quickly and decisively," Fitzpatrick said.
The organization's president, Edmund Daukoru of Nigeria, said talk of the possible need of a further 500,000-barrel cut was "in line with my own thinking," Dow Jones Newswires reported.
OPEC price hawks such as Nigeria and Venezuela have strongly advocated a cartel-wide production cut since the start of the month.
But without public support from Saudi Arabia, the market took with a grain of salt the likelihood of any cuts.