Nov. 5 (Bloomberg) -- The Organization of Petroleum Exporting Countries will cut output by 1.1 million barrels a day between October and January, 400,000 barrels less than the group pledged at a meeting in October, the Energy Department said.

OPEC, responsible for 40 percent of world oil supply, agreed to reduce production by 1.5 million barrels a day at an Oct. 24 meeting in Vienna. The 70 percent projected compliance rate compares with a 50 percent rate on previous OPEC decisions, the U.S. agency said in its newsletter, This Week in Petroleum.

``Current market conditions and an expected growth in non- OPEC production may help maintain discipline among OPEC members and keep OPEC crude production from rising in 2009,'' the department said.

Oil has fallen 56 percent since its July 11 record of $147.27 a barrel as a credit crisis threatened to send the world economy into a recession, cutting energy demand. Non-OPEC supply is forecast to grow 730,000 barrels a day in 2009, Energy Department data show.

``Existing projects, other than those impacted by taxation regimes in other countries that would result in operating losses in the current pricing environment, will likely continue to operate unless prices fall dramatically,'' the agency said.

Saudi Arabia, OPEC's biggest member, is expected to produce 1 million barrels less in the first quarter than the country's peak production this year, the agency said. Saudi output rose to 9.6 million barrels a day in July after pledging to boost output to stem prices, according to data compiled by Bloomberg.

Spare Capacity

The OPEC cuts may increase the group's spare capacity to 4 million barrels a day by the end of next year, ``nearly all in Saudi Arabia,'' the Energy Department said.

The added capacity gives the Saudis ``a significant cushion that they could use to dampen the impact of future disruptions or geopolitical uncertainties,'' the agency said.

Crude oil for December delivery today fell $5.23, or 7.4 percent, to $65.30 a barrel on the New York Mercantile Exchange, the biggest drop since Oct. 10.

To contact the reporter on this story: Robert Tuttle in New York at rtuttle@bloomberg.net

Last Updated: November 5, 2008 16:44 EST