In a bold but not unexpected move, the Organization of Petroleum Exporting Countries (or OPEC) cartel agreed on Wednesday to reduce production starting next month. Seen as a desperate bid to put a floor on falling oil prices, the group – led by Saudi Arabia – promised to take 1.2 million barrels a day out of the market.
OPEC’s First Output Cut in 8 Years
OPEC's decision to cut oil production was not totally surprising though the magnitude of reduction were deeper than many analysts had expected. The move aims to trim output to 32.5 million barrels per day -- at the low end of a preliminary agreement struck in Algiers in Sep.
Crude prices, which reached $110 per barrel in mid-2014, fell to a 12-year low of $26.21 in Feb on a supply glut amid slowing demand. In particular, the oil rout alarmed many of the countries whose economies depend on the commodity’s exports.
A sop to populous big-spending oil producers such as Venezuela and Iran, the cartel’s cutbacks was a mild loss for Saudi Arabia that has been adamant about its continuing strategy to preserve...