Friday, December 10, 2004

Opec ministers agree to cut oil over-production

Opec ministers agree to cut oil over-production
The agreement signals that Opec is prepared to defend oil prices at over $40 a barrel and that it will seek to cut output further early next year if prices fell again.

The move to keep oil prices above $40 a barrel will not be welcomed by consuming nations as the relatively high oil price has been blamed for a slowdown in economic growth.

It should be noted that there is not going to be a real cut in terms the ceiling set by OPEC. OPEC had stepped up production in order to cool the market a little, but in doing so many members led by Saudi Arabia were exceeding their quotas. The new agreement is saying that all the members will start producing at the OPEC agreed upon ceiling.

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