OPEC agreed on 28th September to reduce its oil output to 32.5 million bpd from the current production levels of around 33.24 million bpd, at a six hour meeting held in Algiers, Algeria. The announcement resulted in a price surge with Brent crude jumping by $2.84 a barrel to $48.85 and WTI leapt to $47.13.
The producing group is expected to finalize the plan at its next formal meeting on 30th November 2016 in Vienna.
In the meantime, a committee is to be formed to determine how much each country would have to cut and then report to the group at its next meeting in Vienna.
Oil analysts are confident that taking 700,000 and 1m b/d off the market should have a meaningful impact on global supplies and prices.
Qatar’s energy minister and OPEC president, Mohammed bin Saleh al-Sada, said after the meeting co-ordinated action was needed as excess supplies were taking longer than expected to ease, keeping the oil market under pressure.
“The rebalancing was going to happen anyway but we needed to accelerate,” he said.
Jamie Webster, a Fellow at the Center on Global Energy Policy, commented “Opec is moving in the right direction, but this is not over”.
The last time the cartel cut production was during the financial crisis in 2008.