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OPEC to Cut Oil Supply by 500,000 Barrels per Day

Published 09/10/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

Crude oil prices are on the rise again after the Organization for Petroleum Exporting Countries (OPEC) directed its members to comply with output quotas, reducing supplies by roughly 500,000 barrels per day. The move will limit 11 members to a total production of 28.8 million barrels a day, returning production levels to those of last September.

The organization has characterized the decision as a move to “trim oversupply,” as the U.S. and world economies continue to struggle. Over the last four weeks U.S. gas demand was down 2.1 percent compared to the same period last year. According to OPEC, it is currently producing 900,000 barrels of oil a day above quota.

Crude oil for October delivery rose 66 cents, or 0.6 percent, to $103.92 a barrel by 9:30 a.m. on the New York Mercantile Exchange. However, the increase is still a far cry from the record oil prices of $147.27 a barrel on July 11. Since that time, the price of oil has fell by nearly 30 percent.

Another factor likely to contribute to the rise in prices is the hurricane activity in the Gulf of Mexico region. Last week Hurricane Gustav swept through the gulf. Despite causing little damage to oil rigs, Gustav nearly brought production to a standstill. Refineries in the region are only operating at 78.3 percent of their operable capacity as of last week. Now, with Hurricane Ike bearing down on the Gulf region, production will be shutdown once again to prepare for the storm.

Source CNNMoney.com:

The Organization of the Petroleum Exporting Countries announced early Wednesday that it will return to oil production levels from last September, about 28.8 million barrels of oil per day.

The announcement means that the cartel will be reducing oil allotments by roughly 520,000 barrels per day, because member countries often break the contract and produce more oil than they are allotted. The group met in Vienna, Austria.

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