OPEC agrees first reduction of oil production in 8 years

Oil prices surge across the world after the OPEC reaches an agreement to reduce oil production to 32.5 million.

The Organization of the Petroleum Exporting Countries (OPEC) has managed to commit its divided members to reduce world oil production for the first time in eight years, reports Bloomberg.

After seeing the barrel of oil drop from over $100 in June, 2014 down to $40 a barrel in December 2015 due to an excess of oil in the market and the stagnation of key economies such as China, Europe and the United States, the OPEC countries has come together to reduce the production of oil from today´s 33.7 million barrels per day to 32.5 million barrels per day.

The agreement, announced by the Iranian Oil Minister Bijan Namdar Zanganeh on Wednesday in Vienna, boosted the price of Brent crude oil from $46 to over $50 per barrel.

Many experts and oil companies across the world expected the OPEC to come to this decision much earlier on, as the slump in oil prices has taken a huge toll on major players such as BP, Shell, Exxon Mobil and Repsol – all of which have slashed thousands of jobs.

It has been reported that Saudi Arabia, unquestionable leader of the 14-country group of oil producers, was willing to take a hit on its oil revenues due to oversupply in order to reduce the profitability of the fracking business, especially in the U.S.

While the OPEC countries are cutting their oil production, exception have been made for Iran, which will freeze production near its current output, Nigeria and Libya – both of which have seen their operations hurt by unrest and violence.

In addition to the OPEC´s commitment, Saudi Arabia is hopeful that non-OPEC oil producers will contribute by reducing 600,000 barrels per day of production in total, with most of it coming from Russia.