Beginning January 2019 and followed by an initial period of six months, crude oil production will be cut by 1.2 million barrels per day, a decision which was made in Vienna, Austria on Friday by OPEC and non-OPEC countries.
The Organization of the Petroleum Exporting Countries (OPEC), whose major leader is Saudi Arabia and non-OPEC oil producers met last week in Austria and came to an agreement to cut their crude oil production in hopes to counter the drop in oil prices that has taken place over the last two months. Although, the move also comes after more than two years of depressed oil prices, which have more than halved since 2014, due to the supply glut on the market.
The agreement made discloses that OPEC member states will cut their crude oil production by 0.8 barrels per day and the non-OPEC oil producers which will include Russia will cut their crude oil production output by 0.4 million barrels per day – less than their production levels of October.
Details for individual quota cuts for each member state however were not given.
Prior negotiations on behalf of Venezuela and Libya to be exempt from cutting down on their crude oil production output resulted in their being granted the exemption due to their special political situations and following this exemption the agreement was then reached by OPEC and non-OPEC members.
OPEC and other crude oil production countries have experienced more pressure in the global market competition due to the rise of US crude oil production which has increased since early 2017 from 2.5 million barrels per day to 11.7 million barrels per day.
The joint action taken by OPEC and non-OPEC members to cut their production of crude oil comes at a time of declining oil prices due to an oversupply in the global market to around 30 percent over the last two months which brought the price per barrel down to $60 a barrel of Brent – the European benchmark.
OPEC and non-OPEC members hope that their reduction in crude oil production will increase the price of oil per barrel a day.
According to the agreement made on Friday in Vienna, Austria, and according to Russian Energy Minister Alexander Novak, Russia will cut its crude oil production by two percent from their October output of 11.4 million barrels per day.
However, it is noted by Novak that Russia will reduce its crude oil production supply gradually because of its climactic and technological conditions.
15 countries make up OPEC and they are Saudi Arabia, Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabou, IR Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, United Arab Emerites, and Venezuela. Non-OPEC members are: Russia, Azerbaijan, Oman Mexico, Malaysia, Sudan, So. Sudan and Bahrain.