OPEC cuts 2 million barrels
The Organization of Petroleum Exporting Countries, in a bid to prop up falling oil prices, said Wednesday that it would cut production by 2.2 million barrels a day starting next month.
A production cut had been widely expected. Indeed, U.S. crude for January delivery fell $1.55 to $42.05 a barrel shortly after the announcement. Oil had been as high as $45.50 earlier in the day.
That is 2 million on top of a previous 2 million barrel cut, so they are down 4 million a day from what they where pumping in September. That is a 14% cut in OPEC production, based on OPEC's official numbers. In reality, it's probably a bit less because the OPEC members usually cheat more more as production goes down. But it goes with a coordinated cut by non-OPEC members, so global production will be sharply down.
OPEC's goal is to get prices back in the $70 to $100 range. I expect this cut will force prices up eventually, but it might take a while since the economic collapse is still driving demand down.
Jay