OPEC members have agreed to limit crude oil production in a bid to accelerate the rebalancing of the global markets.
Members convened at an extraordinary meeting in Algeria and agreed to limit production to between 32.5 million and 33 million barrels per day – a reduction of around 700,000 barrels per day.
Over the past two years, challenges have emerged from the supply side of the global oil market and as a result, prices have more than halved and volatility has increase.
There have been deep cuts in investments as well as layoffs and OPEC said that this has led to a potential risk that oil supply may not meet demand in the future.
OPEC said following the meeting that ‘it is not advisable to ignore the potential risk that the present stock overhand may continue to weigh negatively well into the future, with a worsening impact on producers, consumers and the industry’.
It represents the first production cap imposed since 2008.
In a press statement following the meeting, OPEC says its objective is to stabilise the oil market and avoid the adverse impacts in the short- and medium- term.’
‘[…] global oil demand and supply balance presented by the OPEC Secretariat, noted that world oil demand remains robust, while the prospects of future supplies are being negatively impacted by deep cuts in investments and massive layoffs. The Conference, in particular, addressed the challenge of drawing down the excess stock levels in the coming quarters, and noted the drop in US oil inventories seen in recent weeks.’