As uncertainty beclouds the future of crude prices, members of the Organisation of Petroleum Exporting Countries (OPEC), met yesterday November 11th, in Abu Dhabi to decide on how to cut crude supply in order to forestall further declines in price.
Saudi Arabia specifically clamoured for an immediate cut by OPEC producers to a daily output of one million barrels starting early next year. In the meantime, the Kingdom said it is taking the lead by cutting its output to 500,000 barrels a day come December.
The move is aimed at stabilising crude prices which have declined rapidly in recent times, thereby affecting the finances of OPEC members and global oil companies.
Although OPEC was unable to reach an agreement with other non-OPEC producers who also attended the Sunday meeting, OPEC made it known that it is going ahead with the proposed cuts come next year.
“We are going to do everything we can to keep inventories and supply-demand fundamentals within a reasonably narrow band around balance, and we believe markets will calm down.”
The almost unexpected October crash in global crude prices raised concerns from stakeholders who called on OPEC to act swiftly towards remedying the situation. This is necessary because OPEC members like Nigeria need crude prices to remain high for obvious reasons, one of which being the fact that there are budgets to be financed.
But at the same time, OPEC members need prices that are low enough to stimulate demand from buyers.
Meanwhile, analysts believe OPEC, led by Saudi Arabia, of course, “is acting responsibly by reducing its production that it had earlier brought online to offset possible Iranian losses.”
Note that although the Iranian sanctions have taken effect, the American Government has now given waivers to eight of the country’s customers, thereby going against its earlier insistence on cutting off all of Iran’s oil from the global oil market.