World financial crisis

Opec members cut oil production to combat price fall

Article published on the 2008-12-17 Latest update 2008-12-17 15:10 TU

Opec members at meeting in Oran, Algeria. Qatar Energy Minister Abdullah bin Hamad al-Attiyah (L) and Saudi Oil Minister Ali al-Naimi (R).
(Credit: Reuters)

At a meeting in Oran, Algeria, on Wednesday Opec members have agreed to a massive cut in oil production, to counter a big drop in prices since the onset of the world financial crisis. Despite the move, prices continue to fall.

Opec agreed to cut production by seven per cent, or about two millions barrels a day, making it the biggest cut in production in history.

Opec's members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. 

Because of reduced demand since the start of the world financial crisis, prices have dropped significantly from a high of 147 dollars a barrel in July.

"They think the global financial crisis is far from over, they're very, very worried," said Margaret McQuayle from Platts Energy Specialists in London.

Non-Opec members also said they were ready to cut production, with Russia and Azerbaijan supporting the Opec decision.

But there are fears that this move could do more harm than good, and may not necessarily mean an increase in demand.

"Low prices are not necessarily that great for longer-term investment," McQuayle told RFI.

This year global oil demand is set to fall for the first time since 1983.