TEHRAN (FNA)- An emergency OPEC meeting on Friday reached swift agreement to chop production by 1.5 million barrels per day (bpd) in an initial attempt to halt a deep oil price slide.
International benchmark US crude has slumped by close to 60 percent from a record high of $147.27 hit in July. On Friday, it fell again to below $63 a barrel.
“The decision was straightforward,” Saudi Oil Minister Ali al-Naimi said after the meeting.
“OPEC will do whatever is necessary to balance oil markets.”
The speed of the oil market’s collapse after a record rally stirred memories for the Organization of the Petroleum Exporting Countries of the Asian financial crisis in the late 1990s.
OPEC’s sluggish response then as demand disappeared and oil stocks mounted up helped to push oil to less than $10 in 1998.
“It is not yet clear if OPEC is going to make that mistake again,” analysts say.
Before the roughly two hours of talks, which ended just before noon (1000 GMT), ministers had agreed about the need to reduce production, but differed over the extent of any cut.
Saudi Arabia and other core Persian Gulf producers have relatively low price requirements and are nervous about further destruction of demand in consumer countries as the world economy falters.
They had favored a relatively modest reduction of around a million bpd, delegates said.
Iran and Venezuela were among those who had pushed for a deeper cut, with some asking for around 2 million bpd.
But the extent of the market’s collapse focused minds and the two sides soon met in the middle.
“The message to the market is, first, of the strength and unity of OPEC in terms of its decisions. There was no dispute or fight, here we were all in agreement,” said Venezuela’s Energy and Petroleum Minister Rafael Ramirez in an interview with Venezuelan state television.
OPEC’s President Chakib Khelil of Algeria said the only option for member countries was to respect the new agreement.
“They don’t have a choice. What choice do they have? See the oil price go down to lower levels? They’ll make the cuts,” he said.
He also said OPEC would take further action if necessary before the next scheduled meeting in December in Oran, Algeria.
Under Friday’s agreement, the 1.5 million bpd being removed from the September production ceiling of 28.8 million bpd includes 466,000 bpd less from top exporter Saudi Arabia and 199,000 bpd less from Iran, the second biggest exporter, OPEC said in a communiquÃ©.
Although the group said at its September meeting it would strictly adhere to targets, it is still pumping above its collective ceiling.
Khelil said the total removed from the market by the end of the year would be closer to 1.8 million bpd as overproduction was eliminated.
Saudi Arabia, the only OPEC member to be pumping significantly above target, has already reduced supplies slightly. It unilaterally increased its production when prices were racing to their July record.
Many OPEC members described the Saudis’ unilateral increase as a flagrant disrespect for the cartel and its fundamental agreements, and blame the move as to be among the causes for the slumping prices.