Organization of Petroleum Exporting Countries (OPEC) on Wednesday agreed to reduce oil production, aiming to stabilize oil prices. According to Reuters, this is the first such deal in eight years.
The agreement in principle was reached in Algeria, where the OPEC oil ministers agreed to keep the production at 32.3 and 33 million barrels per day. The current output is reported to be 33.24 barrels per day.
Brent crude oil rose some six percent reaching almost $49 a barrel after the news.
OPEC said the set range would accelerate the ongoing drawdown of the stock overhang and bring the rebalancing of the oil market forward.
Iranian news agency Shana has quoted Iran’s petroleum minister Bijan Zanganeh as saying: “Today, an exceptional decision was made at OPEC.”
He reportedly said he was happy with the decision, as OPEC showed it could be united.
“In my opinion, it was a pleasant and very important decision OPEC made after two and half years for market management,” Zanganeh said, Shana reports.
He was referring to OPEC’s decision not to cut oil production two and a half years ago when U.S. starting pumping its shale reserves. The decision sent oil prices from over a $100 a barrel, to the current levels of below $50.
“Despite all the tensions insinuated or sometimes brought about among the members, the decision served as a good prelude for OPEC role,” Shana quoted Zanganeh as saying.
To remind, while fighting for market share with the U.S., OPEC has also had internal struggles, with Saudi Arabia previously saying it would cut output only if Iran does so as well. Iran, on the other hand, has been aiming to boost its output to the pre-sanction levels of almost four million barrels a day.
The decision on the output ceiling for each country within the OPEC is expected to be made at OPEC’s formal meeting in November.
OPEC also said that its Member Countries have decided to conduct a dialogue with non-member producing countries, with the objective to stabilize the oil market and avoid the adverse impacts in the short- and medium-term.
Also, shares of several offshore drillers rose yesterday. According to Motley Fool, which posted a piece on Seadrill and Atwood Oceanic rising more than 10 percent, and 12 percent respectively, this was also caused by the OPEC agreement.
Offshore Energy Today Staff