In an attempt to help stabilize an imbalance in commodity prices, as well as to address market oversuppy in light of plunging consumer demand, OPEC convened in Oran, Algeria, on Dec. 17.
The cartel decided to cut production another 2.2 million barrels of oil a day (MMbopd), following its initial reduction of more than 1.5 MMbopd in October. According to OPEC, member countries are to reduce production by individually agreed upon amounts.
Venezuela's Ministry has already reported that it will slash production output by 189,000 barrels a day in compliance with OPEC's decision, while Azerbaijan offered an oil output cut of up to 300,000 barrels per day.
OPEC noted in its overall demand/supply projections for the year 2009 that an abundance of crude volumes has entered the market in excess of actual demand and that this is clearly demonstrated by the fact that crude stocks in OECD countries are well above their five-year average and are expected to continue to rise.
According to OPEC's assessment, the impact of the grave global economic downturn has led to a destruction of demand, resulting in unprecedented downward pressure being exerted on prices, which have fallen by more than $90 a barrel since early July 2008.
OPEC cites that its main objective for issuing another cut is to help maintain crude oil prices at fair and equitable levels, for the future well-being of the market and the good of producers and consumers alike.
Since OPEC announced its production cut, crude prices dropped more than 6% to a four-year low, briefly nearing $40 a barrel, Reuters reports.
OPEC will meet again on Sunday, March 15, 2009, in Vienna, Austria, shortly before the OPEC International Seminar.
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