Vienna - Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) decided Friday in Vienna to cut their total production by 1.5 million barrels per day, in reaction to falling prices and slowing demand.

"There is an oversupply, and the stocks are very high," said OPEC President and Algerian Energy Minister Chakib Khelil, explaining the decision.

Benchmark light sweet crude oil fell by more than 3 dollars per barrel (159 litres) on the news, to 64.72 dollars.

"The market reacted negatively because people still think about the impact of the financial market," rather than about oil supply, said Ehsan Ul-Haq, chief analyst at JBC Energy in Vienna.

Ul-Haq said OPEC members are likely to only implement around 60 per cent of the announced cuts, which would diminish the impact of the production cut.

The decrease from the cartel's current quota of 28.8 million barrels per day, would take effect at the start of November, OPEC said in a statement.

Khelil denied that the cartel's move would have any impact on inflation or global economic growth.

"Growth has disappeared already in the US, has disappeared in Europe," he said.

However, the news from Vienna sent European shares into a tailspin Friday amid concerns that the move will result in higher energy costs just as the world economy heads into a sharp slowdown.

Europe's blue-chip Stoxx 50 plunged about 9 per cent in late morning trading.

OPEC, which produces around 40 per cent of global oil output, has seen its basket price hover below 70 dollars per barrel since mid- October, down from its July high of 140.73 dollars.

In its latest forecast, OPEC estimated that oil consumption in North America would be 1.2 per cent lower in 2009 than this year. At the same time, US reserves have recently grown more than expected.

The current economic crisis "has nothing to do with oil, I assure you," OPEC Secretary General Abdullah al-Badri told reporters.

"We would like to have a reasonable income," he said.

The cartel is scheduled to meet next in Oran, Algeria on December 17. But Khelil said the ministers might meet again before that if "it was warranted."

In September, the 11 cartel members subject to the output quota produced an average 29.1 million barrels per day, around 270,000 barrels per day above the agreed limit.