The world’s leading oil producers agreed on Wednesday agreed to their first new production limit in three years, settling six-month argument over output levels in Saudi Arabia’s favor.
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The Organization of the Petroleum Exporting Countries agreed on a new supply target of 30 million barrels a day, roughly in line with current production.
The agreement caps output for all 12 OPEC members for the first half of the year, keeping supply levels near three-year highs, enough to rebuild lean global inventories.
OPEC, which provides about 40 percent of the world’s crude, announced huge supply cuts in late 2008 amid a collapse in global demand, capping production at a combined 24.845 million barrels a day for all members except Iraq.
But oil production has been exceeding OPEC’s quota, with Libya, Saudi Arabia, Angola, and Nigeria upping their crude production in November, more than offsetting cuts in supply from Algeria, Venezuela, and the United Arab Emirates.
Including Iraq, OPEC production grew 1.9 percent last month to 30.367 million barrels a day. Oil production exceeding OPEC’s quota by 11 percent in November.
Higher supply from OPEC has kept a leash on oil prices. Brent crude traded at $108 a barrel on Wednesday, down from a year-high of $127 in April.
When OPEC last met in June, it failed to reach an agreement on higher supplies, leaving Saudi Arabia free to boost production in order to compensate for lost Libyan supply. Saudi Arabia said it pumped 10 million barrels a day last month, its highest in decades.
Iran, Venezuela and Algeria, all of which already pump at full capacity, want to keep oil prices above $100 a barrel, while Saudi Arabia and other gulf productions would prefer lower prices to help nurture global economic growth. Emirati officials said recently that $80 to $100 a barrel was preferable.
“Saudi Arabia is the central banker of the oil market and the decision that they will bring more oil to the market is definitely a good one,” said Fatih Birol, chief economist at the International Energy Agency.
As Libyan supplies quickly recover after the nation’s civil war, climbing 64 percent to 570,000 barrels last month, world oil inventories are likely to increase if OPEC maintains output near current levels.
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