On Wednesday, OPEC reached an agreement that will cut its output of oil for the first time in eight years. The current rate of production is 33.24 million barrels per day; the new aim is 32.5 million barrels per day. The decision came to fruition at a two-day OPEC meeting in Algeria. However, it is not yet an official deal. Specific details have not been released yet, and decisions regarding individual countries' output will not be discussed until late November. Plus, there are several more related proposals from OPEC affiliates that warrant discussion. If an official deal is eventually reached and put into effect, it will undoubtedly raise oil prices (which have been cripplingly low over the past year) and help combat the global oversupply of crude oil.
The agreement is viewed as a necessary action in the face of the global oil production glut. Over the past few years, OPEC members and other oil-producing nations have ramped up production rates in a competition for buyers, causing a severe oversupply of oil barrels and a sharp decline in prices. Increased prices and more even competition could balance global supply and demand levels and bring in revenue to smaller players such as Venezuela. However, establishing individual production levels will not be easy. Some countries still wish to produce at their own frenetic rates, while others refuse to cut production unless other nations do as well. Saudi Arabia and Iran, bitter rivals both politically and economically, are a prime example of the latter. In addition, the leaders behind the agreement seek compliance from non-OPEC oil producers, such as the United States. Such a sweeping deal will be difficult to achieve, and some are skeptical whether these logistics will hold together for the proposed deal.
Major oil-producing nations will be wrapped up in discussions for the next few months, discussing details for the OPEC agreement. Should it materialize into an official deal, it will prove a major shift for the oil industry.