In a surprise decision, OPEC decided to cut oil production by 520,000 barrels a day (in a meeting that ended at 3am EDT). Oil prices have jumped modestly on the news.
Going into the meeting, which was called to decide on a response to the recent 30% plunge in prices, OPEC was expected to stand pat. Instead, the cartel will (at least officially) reduce production by adhering more closely to the previously agreed on target (variously reported as 28.8 million or 32.7 million barrels a day).
The decision is more important for what it reveals about OPEC’s changing attitude toward $100+ oil than for the actual change in the world’s oil supply. Half a million barrels represents less than 1% of the world’s daily consumption, which is about 85 million barrels. As recently as last winter, however, the thought that $100 oil would lead to a cut in oil production would have been unthinkable. Oil is still 33% higher than a year ago and 4X its level in 2003.
Russia has also announced that it will cooperate closely with OPEC–a move that will likely further inflame western tension with the Putin-Medvedev regime. OPEC supplies about 40% of the world’s oil, Russia about 11%.
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