OPEC announced a cut of 520,000 barrels per day to its output yesterday, citing downside risks to the oil market as prices fell below US$100 for the first time since April.
After a marathon meeting that finished at about 3am, late even by OPEC standards, the president of the organization said its members had agreed to begin reducing production immediately.
“If you do your own calculations, it is a cut of 520,000 barrels per day,” OPEC president and Algerian Energy Minister Chakib Khelil said, announcing a new OPEC output quota of 28.8 million barrels per day excluding Indonesia — which officially left OPEC yesterday — and Iraq.
The cut, which immediately boosted sliding oil prices, was likely to dismay consumers hoping for bigger falls.
US Energy Secretary Samuel Bodman had asked producers on Tuesday to keep oil markets well supplied.
“The United States can order its companies [around] but not OPEC,” said OPEC Secretary General Abdullah al-Badri in response to a question about possible concerns in Washington about the announcement.
Oil sank below US$100 for the first time in five months in London on Tuesday when Brent North Sea crude for delivery in October dropped to US$99.04 in late European trade.
But prices rebounded in Asian trade. New York’s main contract, light sweet crude for delivery next month rose US$0.92 to US$104.18 a barrel while Brent North Sea crude rose US$0.65 to US$101.07.
Analysts had suggested OPEC would keep its official policy unchanged but would discreetly agree to rein in production by cracking down on output by some members that are pumping above their quota.
The candor of the final announcement was a surprise.
Khelil said he did not expect the OPEC decision to reverse the downward trend of oil prices, which peaked at US$147 a barrel in July.
“My hunch is probably the price still will be going down despite the decision that we made,” he said.
“I don’t think this will affect the consumers in any way because first of all, there’s an oversupply. Everybody agrees on that,” he said.
OPEC also announced that Indonesia had formalized its departure from the group after it became a net importer of crude oil.
“The conference regretfully accepted the wish of Indonesia to suspend its full membership in the organization,” OPEC said in a statement.
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