The decision by all 11 members of the Organization of Petroleum Exporting Countries is aimed at supporting crude prices at around $25 a barrel in the face of eroding demand in the group's key markets in the United States, Europe and Asia. The cut is to take effect Sept. 1.
Energy analysts said the move would indeed shore up prices, but not to the point of causing serious pain for consumers in importing countries.
"You will see a temporary rally," said Edward Ennis of SG Securities in London. "It will not stop the decline in crude price."
The White House is using OPEC's action to promote the president's call for increased domestic energy production and exploration, reports CBS News Correspondent Peter Maer. Spokesman Ari Fleischer avoided accusing OPEC of trying to drive up prices. He says the president's efforts are focused on "stability in pricing.
"It's important that the nation not go through giant price fluctuations," he said.
"OPEC is responding to what it sees as market reasons to not let the price drop further," Fleischer added.
OPEC, which pumps about 40 percent of the world's oil, has a current production target of 24.2 million barrels a day. It has already reduced its official production twice this year by a total of 2.5 million barrels a day.
Ministers announced their latest cut in output in a terse communiqué, after conferring privately by telephone.
The ministers are keeping an "open option to hold an extraordinary meeting soon if the market warrants it," the communiqué said.
OPEC is anxious to keep its benchmark crude price at no less than $25 a barrel.
"From what the balance of supply and demand looks like for the fall, they'll achieve that," said Jan Stuart, head of energy research in New York for the Dutch bank ABN AMRO.
At the very least, Stuart said, OPEC will succeed in putting "a floor" under crude prices.
Saudi Arabia, OPEC's most powerful member, was among those backing a cut of 1 million daily barrels. So were Kuwait, Qatar and Nigeria, said a source at OPEC headquarters in Vienna, Austria.
Iran, the cartel's second-largest producer, and No. 3 Venezuela declared their support for the cut later in the day. Venezuela's oil minister Alvaro Silva said Tuesday that OPEC was weighing whether to slash production by as much as 1.5 million barrels a day, or 6 percent of its current target.
Crude prices have slid lower since the cartel's ministers agreed to hold output steady at their last meeting on July 3.
September contracts of North Sea Brent crude jumped 46 cents on news of OPEC's decision to a high for the day of $25.36 a barrel, in trading on the International Petroleum Exchange in London.
Light, sweet crude for September delivery rose by 49 cents to $26.80, before backing off to $26.75 in trading on the New YorMercantile Exchange.
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