TO cut or not to cut — and the debate continued well until Sahur on Wednesday in Vienna, as the OPEC ministers sat down for the first time since the heady days of March. And in line with most OPEC ministerial, this too was no exception — taking place in real stormy circumstances. Despite the prices touching the five-month low — crossing below the $100 mark at a point — the crude world was faced with storms and Hurricanes all around.

There was thus a sense of urgency at the OPEC meeting, one could definitely feel and fathom. And the temperature inside the meeting hall must be soaring, rather rapidly, one could rather deduce, bringing to home the point that all shades of opinion within the grouping, are ultimately taken care of. It’s never a one man show, as some insist. And this seems to be the reason for the OPEC to be still a vibrant force and surviving.

And despite the rising temperatures, the fears that the market was currently oversupplied while demand for oil was slowing prevailed and led the group to concede it would “strictly comply” with production quotas set in September 2007.

As per the OPEC’s president, Chakib Khelil, the decision meant that OPEC producers would effectively reduce their overall production by 520,000 barrels a day. Analysts interpreted the decision as keeping existing allocations intact, while calling for tighter compliance. Explaining the decision, OPEC identified a shift in sentiment in the oil market linked to falling economic growth, a strengthening dollar, easing geopolitical tensions and greater supply.

The decision went somewhat against the common perception. People at most had expected an informal cut rather than a formal announcement to the effect. However, this is not the first time that OPEC succeeded in staying a step ahead of the pundits. The group has mastered the art of confounding analysts and pundits, keeping them guessing — and often wrongly — most of the times. In the past also some of its decisions caught most pundits on the wrong foot. This time also most analysts had expected the group to maintain formal targets at the Vienna meeting, although some had suggested, the group would discreetly agree to rein in production over and above the output quota of the members.

Ahead of the meeting, within the group, a split on familiar lines was evident. Iran, Libya and Venezuela openly advocated reductions in output to stem further price declines. OPEC’s own analysis suggested that the group was producing far more oil than is needed. According to Lehman Brothers, OPEC is pumping 2.18 million barrels a day more than it did last year.

On the other hand the moderates within the OPEC appeared ready to drive the markets even softer. Saudi Arabia which generally avoids taking a public position on such sensitive issues had indicated before the advent of the meeting that it wanted to keep crude flowing at the current levels.

“The markets are well balanced. We have worked very hard since June to bring prices to where they are now,” Oil Minister Ali Al-Naimi told reporters in Vienna on Tuesday morning. “We have been very successful.”

Saudi Arabia has been producing about 9.5 million barrels a day, at least 600,000 barrels a day more than its official OPEC quota since June, when it reiterated its commitment before the world leaders to keep the world well oiled. Being the largest producer and exporter of oil, Riyadh feels, and rightly so, that it has a responsibility to the world in this regard and the Saudi announcement to jack up its production then was very much in accordance with the commitment.

Despite conceding overproduction, apparently for political reasons, other Gulf producers — Kuwait and UAE — had also hinted that they might prefer to keep the output at the current levels. The major Arabian Gulf oil producers, often termed as moderates within the exporters group, were weary of reaction of the major oil consuming nations to any formal cut in output at this juncture. However, facts spoke for themselves, it now seems. With prices falling rapidly and amidst signs of a global slowdown in consumption — often termed as demand destruction — resisting the overflow was a natural temptation. Slowing economies and falling oil demand in major developing countries have led to a slowdown in the growth of oil consumption, every one agreed. As a result, many analysts agree there is more than enough oil on the market. Also, refiners typically need less oil in the third quarter, when they shut down for maintenance.

Also the US petroleum demand in 2008 will be weaker than last year’s, according to the US Energy Department’s Energy Information Administration. The EIA expects total US petroleum consumption to decline by 610,000 barrels a day, or about 3 percent, in 2008 versus last year, given prospects for a weaker economy and assumptions for high crude oil and product prices continuing into 2009.

Crude demand in the Organization for Economic Cooperation and Development nations which account for 56 percent of total consumption globally, is on course to fall a fourth straight year in 2008. There are also signs steep demand growth may be slowing in China too.

OPEC projections also recognize the world demand growth next year will be “the lowest since 2002.”

Leaving production unchanged at a time when demand growth is slowing could precipitate a price collapse, as happened in the late 1990s when prices fell below $10 a barrel. And the Jakarta ghost seemed making rounds during the Vienna meeting too, haunting the ministers, cornering ‘the moderates’ within the OPEC to give in.

Signals from the meeting are clear and on the target. OPEC — a master of its own — is ready to defend its turf and cannot be bullied to take decisions.