Ministers for the Organisation of the Petroleum Exporting Countries (Opec) on Wednesday agreed to remove a record 2,2-million barrels per day (bpd) from oil markets in a race to balance supply with the world’s rapidly crumbling demand for fuel.
The 12 members of Opec were also aiming to build a floor under prices that have dropped more than $100 from a July peak above $147 a barrel.
The cut comes on top of existing reductions of two million bpd agreed by Opec at its last two meetings.
Oil showed little reaction to the deal reached after four hours of talks, with prices trading just above $43 a barrel.
Saudi Arabia, the world’s biggest oil exporter, has led by example — reducing supplies to customers even before a cut has been agreed to help push prices back towards the $75 level Saudi King Abdullah has identified as ”fair”.
Ali al-Naimi, the kingdom’s Oil Minister, was first to publicly call for curbs of two million bpd ahead of the meeting.
”The purpose of the cut is to bring the market into balance and avoid the gyrations of the price,” he said. ”The cut may lead to higher prices or may not.”
Others in the group that pumps more than a third of the world’s oil said at least two million barrels needed to go from daily output to prevent a massive build in inventories.
”A minimum of two million we think needs to be cut so we can balance the market,” Iraqi Oil Minister Hussain al-Shahristani told Reuters.
The cut, the third this year, brings a total reduction in Opec supply to 4,2-million bpd, nearly a 5%t cut in world oil supplies.
Opec has encouraged other producers to cut back too. Russia and Azerbaijan are attending the Oran meeting as observers and have said they could rein in exports in future, but stopped short of am immediate pledge.
Leading a high level delegation, Russia’s Deputy Prime Minister Igor Sechin said in a speech to Opec that Moscow did not plan to join in coordinated output cuts and did not want to join the group.
Oil below $50 is uncomfortable for all producing nations, but especially for Opec members Venezuela and Iran, which are dependent on higher prices to fund ambitious domestic programmes. — Reuters