By Carola Hoyos and Javier Blas - Financial Times
OPEC on Tuesday pledged to cut oil output by 10 percent, in a bid to prop up prices before the summer, when demand in its largest markets falls steeply.

The powerful 11-country oil cartel, meeting in Algiers, resolved to stop cheating on its 24.5m barrel a day quota immediately, a move that would cut output by 1.5m barrels a day.

OPEC's 10 active members - Iraq's struggling industry is not subject to the quota - then intend to reduce their quota on April 1 by a further 1m barrels a day to 23.5m.

Much of the reduction would have to come from Saudi Arabia, the group's biggest member.

The decision pushed oil prices higher, with NYMEX Crude, the US benchmark, jumping $1.04 to $33.87 a barrel and IPE Brent, the European benchmark, rising 93 cents to $30.04.

Obaid bin Saif Al-Nasseri, the United Arab Emirates' energy minister, said: "This decision is pre-emptive action against a fall in prices." OPEC is worried about a short-term price collapse as winter ends in the US and Europe - the largest importers of oil.

In recent months, oil prices have been consistently above OPEC's preferred range of $22-$28 a barrel, although this was defined before the dollar's steep decline.

Ali Naimi, Saudi Arabia's energy minister, said: "The price now is high but do you know what the price will be in April, May, June? Should we wait until we have a crash and then work like we did last time? In 1998, it took us almost two years to get things back to normal."

According to the International Energy Agency, the global energy watchdog, demand for OPEC's oil would plunge to 23.3m barrels a day during that time. The IEA estimated that OPEC, including Iraq, produced nearly 29m barrels a day in December, the highest level since March 2001.

When OPEC meets in Vienna on March 31 it could reverse its decision if demand and oil prices remained high, delegates said.

The US, the world's largest consumer of oil, reacted cautiously. Trent Duffy, a White House spokesman, said: "It is our hope that producers do not take actions that undermine the American economy and American workers, and American consumers for that matter."

So far, high oil prices have shown little sign of holding back the US economic recovery.

Analysts said the impact of Tuesday's announcement was expected to be further limited by the fact that OPEC members were unlikely to adhere to all the cuts.

Oil prices have hovered above $30 a barrel in part because large funds have continued to buy oil as Iraq struggles to return to the market, storage levels in consuming countries remain low, and demand from the US and China grows faster than expected.