OPEC Output Cut Seen as Key to Oil Prices in 2007

For oil traders returning to trading pits on Wednesday, the new year begins with something that hasn’t preoccupied them in years: OPEC production cuts.

After years of maintaining an open-taps policy, the Organization of the Petroleum Exporting Countries has started restraining production to keep oil prices high in the face of a faltering global economy and an unseasonably warm winter in the Northern Hemisphere.

With a military confrontation with Iran and other geopolitical concerns receding to the back burner, analysts say the extent to which OPEC complies with its output restraint will go a long way in determining whether oil prices stay above $60 a barrel this year after ending last year flat for the first time in five years.

“This is the first time in years that OPEC compliance will be a big story,” said Peter Beutel, president of trading advisory firm Cameron Hanover in New Canaan, Conn.

Dow Jones Newswires