Vienna: An emergency Opec meeting on Friday reached swift agreement to chop production by 1.5 million barrels per day (bpd) as a first step towards halting a deep oil price slide.
International benchmark US crude has slumped by well over 50% from a record high of $147.27 hit in July. On Friday, it fell again to just over $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.”
Before the roughly two hours of talks, which ended just before noon, ministers had been in broad agreement about the need to reduce production, but had disagreed over the extent of any cut.
They said they had to balance their own needs with those of a flailing world economy.
“Any cut should not affect the global (financial) market,” said Kuwaiti Oil Minister Mohammed al-Olaim, adding the reduction would be “a wise cut”.
Kuwait and other core Gulf producers, which have relatively low price requirements and are nervous about further destruction of demand in consumer countries, had favoured a relatively modest output reduction of around a million bpd, delegates said.
Venezuela, Iran and Libya, which are more dependent on higher oil revenues, were among those who had pushed for a deeper cut, with some asking for around 2 million bpd.
The two sides met in the middle. They also said they could take further action if necessary before the next scheduled meeting of the Organization of the Petroleum Exporting Countries in December in Oran, Algeria.
“If a further decision has to be made, it will be made and we will not necessarily wait for the Oran meeting,” said OPEC President Chakib Khelil who will host the Algeria meeting.
Saudi sets the pace
Top exporter Saudi Arabia is the only exporter to be pumping significantly above its agreed target and it would be expected to lead the reduction in supplies.
But it has repeatedly said other countries must play their part.
Of the 1.5 million bpd being removed from the September output target of 28.8 million bpd, Saudi Arabia would pump 466,000 bpd less and Iran 199,000 bpd, Opec said in a communique.
When prices were racing towards their July record, Saudi Arabia unilaterally increased its production to try to calm a rally, which was then perceived as out of control.
It has already reduced supplies slightly as global economic recession has destroyed demand and the oil price has plummeted, reviving bad memories for Opec of the 1998 price crash when the market fell below $10.
Venezuelan Minister of Energy and Petroleum Rafael Ramirez said there was a risk oil could fall back to that level.
“We have to handle the situation in a very, very responsible manner as Opec...that way we can avoid a price collapse like 1998,” he said.
In the near term, analysts have said whatever the group does it could struggle to influence the price.