The production cuts that OPEC announced to halt the slump in the international oil price seems to have taken, at the very least, a restraining role in its precipitous slide. OPEC announced cuts totaling up to 1.5 million barrels per day in a series of emergency meetings held in October. One of the oil price benchmarks, Brent Crude, rose to $65.91 after dropping as low as $58.38 upon the market digesting the information that the Saudi cuts were already in motion. Saudi Arabia, being the powerhouse of oil production and price defender, took one of the largest cuts, reducing exports by 900,000 barrels per day. This is quite a change since the past summer, when oil prices reached a peak of $147 per barrel, and the world exerted collective pressure on the Kingdom to radically increase production. At that time, Saudi officials leaked that they would increase oil production by 500,000 barrels per day to reach 10 million barrels a day, the highest ever production for the Kingdom.
The price firmness appears to be a result of a triumvirate of factors, the ebb of the dollar’s recent rally, as well as OPEC’s decisive response to the price drop, and just as important; the market taking notice of all these factors. Although, despite the rapid and coordinated response, it appears unlikely that oil will return to above the $100 mark for the short term, if the economic crisis continues to damp down consumer and industrial demand. Although right now, oil producing countries are attempting to do all they can to keep the price floor around the $80 mark, which is the approximate point most of their national budgets remain solvent.