VIENNA, Austria – At its highly anticipated meeting in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) has agreed to limit its production levels by more than 1 MMb/d, reportedly the first such decrease since 2008.
Effective Jan. 1, 2017, production will be reduced in total by about 4.5%, or around 1.2 MMb/d to 32.5 MMb/d. Plans for the cuts were first announced at OPEC’s September meeting in Algeria. Since then, unrest between OPEC members, especially surrounding Iraq and Iran.
OPEC said that although recent data suggested that market rebalancing is under way, both OECD and non-OECD inventories were still at levels “well above” the five-year average.
The members eventually agreed with a proposal put forth by Algeria in what OPEC referred to as the “Algiers Accord.” Also in line with the proposal, the group said it agreed to institutionalize a framework for cooperation between OPEC and non-OPEC producing countries on a regular and sustainable basis.
“The conference [meeting] underscored the importance of other producing countries joining the agreement,” the statement said.
The Wall Street Journal reported that crude futures jumped to one-month highs upon the news, which equaled the removal of about 1% of global output. The Journal pointed out that both US WTI and European Brent posted their largest percentage gains since February.
WTI is currently above $48/bbl, with Brent inching above $50/bbl.