The Organization of Petroleum Exporting Countries, OPEC, says it will increase its official production quotas but reduce the actual amount of oil on the global market.
Official OPEC output quotas will be increased in June by 900,000 barrels per day, to 25.4 million barrels.
The decision, made Thursday at a special meeting of OPEC ministers, means the amount of oil on the market will actually be cut by two million barrels per day.
Estimates show that in February and March, average production was 27.4 million barrels per day. Ministers said OPEC has decided to control production to avoid an anticipated crash in prices resulting from the end of the war in Iraq and seasonal fall in demand.
OPEC's president, Qatari Oil Minister Abdullah bin Hamad al-Attiyah, said after the meeting that the cartel might examine in June whether another reduction is needed. Raad Alkadiri, an analyst for PFC Energy who sat on the sidelines at the Vienna meeting, says OPEC will review the decision again if necessary.
"It's being proactive on the downside of prices which is what it's done and how it has micro-managed the market over the last few years, and so it's going to work to ensure that the price stays within that band of 22-28 dollars per barrel for the OPEC basket," said Mr. Alkadiri. "Moving forward if it can do that, if it can take that oil off the market and if it can ensure that the stockpile in the second quarter is not too great, then it is actually in a good position to manage markets in the second half of the year and finds itself in something of a driving seat, particularly as a return of Iraqi exports looks like it's going to be delayed for a couple of months."
Iraq, although a founding member of the cartel, is excluded from the OPEC quota system because of United Nations sanctions imposed on the country after its 1990 invasion of neighboring Kuwait. Iraq did not participate in Thursday's meeting in Vienna.
Mr. Alkadiri says a significant amount of investment is required before post-war Iraq can get production up to around five million to six million barrels per day. He estimates that as much as $50 billion may be necessary. The cartel has yet to deal with the problem of reintegrating Iraq, something it is expected to look at in June, when OPEC ministers meet in Qatar.