- guardian.co.uk,
- Wednesday September 10 2008 08:25 BST
- Article history
The oil price rebounded this morning after Opec announced a surprise cut in production in an attempt to halt the recent decline in the cost of a barrel of crude.
Having fallen by almost 30% in the last two months to the fringes of the symbolic $100 mark, US crude jumped by over a dollar to $103.30 this morning.
Brent Crude, which yesterday slipped as low as $99.34, rebounded to $100.63 a barrel after Opec claimed it was reining in production because the world is now oversupplied with oil.
The unexpected cut in production was announced early this morning after Opec members met in Vienna. The cartel said that its members would abandon production increases that were announced this summer - when the oil price had soared to nearly $150 a barrel - and would stick to their previous quota limits.
Assuming all its members agree, this would reduce Opec's oil output by 520,000 barrels per day, to 28.8m barrels, according to Opec president and Algerian energy minister Chakib Khelil.
In a statement, Opec said that the oil price has fallen in recent weeks because of falling demand in the developing world, the strengthening US dollar, and an easing in geopolitical tensions following the end of military action in Georgia.
"All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook," it said.
Even before the Vienna meeting, some Opec members had called for a drop in supply to prevent the cost of oil falling further. There were fears in the cartel that it could be heading for a repeat of the late 1990s, when it boosted production only to see the oil price plunge when global demand dipped.
Most of the 520,000 a day cut will have to come from Saudi Arabia, which announced a production increase in July when political pressure from the West was at its height.
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