OPEC oil producers on Wednesday agreed their first new production limit in three years in a deal that settles a 6-month-old argument over output levels in Saudi Arabia's favour.
The Organization of the Petroleum Exporting Countries agreed a new supply target of 30 million barrels daily, Venezuelan oil minister Rafael Ramirez said, roughly in line with current production.
The agreement caps output for all 12 OPEC members for the first half of the year, keeping supply near 3-year highs -- enough to rebuild lean global inventories.
Higher supply from OPEC has kept a leash on oil prices which traded at $108 for Brent on Wednesday, down from a year-high $127 in April.
When OPEC met in June it failed to reach an agreement on a higher supplies, leaving Saudi Arabia free to open the taps to compensate for lost Libyan supply.
Riyadh says it pumped 10 million barrels a day last month, its highest in decades.
Price hawks Iran, Venezuela and Algeria, all of whom already pump at full capacity, want to keep oil prices above $100 a barrel. Brent crude traded at just over $109 on Wednesday.
"We think the present level is appropriate for producers and consumers," Algerian Oil Minister Youcef Yousfi said of oil prices.
Libyan output won't guide Saudi policy
The hawks sought a commitment from Saudi and its fellow Gulf Arab producers Kuwait and the United Arab Emirates to make room for the restoration of Libya's supply so that collective production does not balloon over the course of 2012.
But going into the meeting Saudi Arabia did not consent to that.
"If Libya increases it doesn't necessarily mean Saudi will cut," said Saudi Oil Minister Ali al-Naimi.
"We don't react to that, we react to market demand," he said.
Saudi and other Gulf producers would prefer lower prices to help nurture global economic growth. The UAE said recently that $80-$100 was preferable.
"Saudi Arabia is the central banker of the oil market and the decision that they will bring more oil to the market is definitely a good one," said Fatih Birol, chief economist at consumer body the International Energy Agency.
With Libyan supplies post-civil war rising more quickly than expected, world oil inventories should increase if OPEC maintains output near current levels.
OPEC's secretariat calculates that 30 million barrels a day from OPEC will meet demand in the first half of the year and build stocks by 650,000 bpd.
According to the US Energy Information Administration (EIA) that would lift inventories among industrialised OECD nations from 56 days of OECD demand now to 60 days by the middle of 2012.