OPEC Agreement to Cut Oil Production

OPEC pic
OPEC
Image: money.cnn.com

With 25 years of experience in the oil and gas industry, Akanimo Udofia serves as the managing director of Nigeria-based Desicon Engineering Ltd. In this capacity, Akanimo Udofia has coordinated efforts related to the completion of projects totaling over $10 billion. The recent agreement to cut oil production by several of the countries belonging to the Organization of the Petroleum Exporting Countries (OPEC) has had a major impact on the petroleum industry.

On November 30, OPEC reached an agreement to reduce oil production. According to the agreement, members of OPEC will cut production by 1.2 million barrels per day. A deal of this kind has not been reached for over eight years.

In recent years, the oil market has been oversupplied, negatively affecting the global supply balance and keeping oil prices very low. This has had an adverse effect on the industry as a whole, but especially on countries like Nigeria and Venezuela. The goal of the OPEC agreement, signed in Vienna, is to benefit the global economy by stabilizing supply levels. The highest-producing nation in OPEC, Saudi Arabia agreed to the greatest level of production cuts.

The impact of the deal was immediate, as prices rose to above $55 per barrel in less than a week, marking a 16-month high. It is unclear whether non-members of OPEC will join in the agreement to curb production in coming months.