ALGIERS—OPEC reached an understanding on Wednesday that it is necessary to cut back production to shore up oil prices, said the iranian Oil minister. The poster, however, will wait until November to finalize plans to address the excess supply.
The consensus, which was reached after a six-hour meeting in the capital of Algeria, represents the first collective recognition on the part of the Organization of Petroleum Exporting Countries that they must take drastic measures to combat a fall in prices that has caused havoc in the economies of producer countries.
it is Not known exactly how they will achieve those cuts. Officials of OPEC announced the formation of a committee to study how to implement the cuts and will present a report at its next meeting, which will take place on the 30th of November in Vienna.
Bijan Zanganeh, the Oil minister of Iran, said that it was proposed to freeze the production for between six months to a year.
In previous years, OPEC has set its goal to achieve a certain level of prices. On this occasion, the group did not set a desired level, but Saudi Arabia said that prices have to exceed US$ 50 per barrel to encourage investment, while Venezuela said that a level of US$ 70 per barrel is fair.
The negotiations can be difficult. Iran, Libya, and Nigeria seek to increase their production by up to 1.5 million barrels a day collectively, while countries such as Venezuela and Algeria can’t afford to lose in oil revenues by cutting production. Sources from the organization said that Iran, Libya and Nigeria will be treated in a different way, but did not specify the way.
Meanwhile, Saudi Arabia, the largest producer of OPEC and its de facto leader, has been extracting crude oil to record levels during the past few months and it was expected that he would come down the pace in the last few months of 2016 and early 2017.
The OPEC, the group of 14 countries that controls a third of world production, has been pumping at record levels, as its members compete among themselves for buyers. Has not approved a cut in production since 2008, when the global financial crisis collapsed the demand and prices fell below US$ 40 a barrel.
The agency proposed on Wednesday to reduce its collective production to between 32.5 million barrels per day, and 33 million barrels per day, a decline compared to the 33.2 million barrels per day produced in August, reported the ministers of hydrocarbons of the member countries.
"Today, OPEC took a decision exceptional," said Zanganeh, the iranian minister, according to the press agency of the state.
The ability of OPEC to return to its traditional role of propping up prices by cutting production, a weapon that has not been used since the contributions began to descend in 2014, had an immediate impact on the markets. The crude oil us benchmark for delivery in November rose US$ to 2.38, or 5.3 percent, to settle at US$ 47,05 barrel on the New York Mercantile exchange. The price of Brent, the international benchmark, has advanced US$ 2,72, or 5.9 percent, to reach US$ 48,69 per barrel in the market ICE Futures Europe.
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