The decision to cut production was taken to keep prices from falling when demand drops in spring in the northern hemisphere.
The Organisation of Petroleum Exporting Countries, which produces a third of the world's oil, said after a meeting in Algiers it was reducing its "24.5 million bpd ceiling by one million bpd to 23.5 million bpd, effective 1 April," according to a joint statement from the 11-nation body.
The statement said there would be "strong commitment from member countries to comply with these agreed production levels."
But OUaid bin Saif al-Nassiri, oil minister of the United Arab Emirates underlined the two-step nature of the decision when he said it would be reviewed at OPEC's next meeting, on 31 March.
"If we see no need for a cut we may reverse the decision," he said.
Oil prices immediately spiked upwards. The price of a barrel of reference Brent North Sea crude oil for March delivery climbed 66 cents from the previous close to $29.77 in late trading in London.
"Our projections indicate that there will be a significant surplus of oil in the second quarter of this year"
New York's benchmark light sweet crude March contract gained 75 cents to $33.58 a barrel in early deals.
OPEC president Indonesian Oil Minister Purnomo Yusgiantoro said: "Our projections indicate that there will be a significant surplus of oil in the second quarter of this year, and if this is not handled in a timely and effective manner, there is likely to be downward pressure on prices."
He said this could cause "volatility in the market, which will be in nobody's interests."
OPEC ministers were also concerned about loss in value from the falling dollar, as oil prices are in the US currency.
Iranian Oil Minister Namdar Zangeneh said OPEC was interested in keeping oil prices at the upper end of the cartel's official price band of $22-28 for a reference basket of crudes.
The production cut was decided in order "to keep in the upper part of the band", which means stopping oil prices from falling below $25 a barrel.
OPEC caught markets by surprise in late September when it trimmed overall output by 900,000 barrels a day to the current level of 24.5 million barrels, sending prices soaring.