OPEC cuts oil production in attempt to halt price slump

The Organisation of Petroleum Exporting Countries (OPEC) has decided to cut production by 1.5 million barrels a day at a meeting in Vienna. The cut is intended to halt the collapse in crude prices, which has left them more than 50 per cent lower than thei

OPEC Chairman Chakib Khelil says it was a necessary measure and the stock market will only be helped by the move.

“What choice do they have? To see the oil price go down to lower levels? It’s not the effect on the financial market, it is the effect of the financial market on the supply,” he said.

Expectations of falling demand dragged the oil price close to $60 a barrel this week.

Khelil says the optimal crude price at the moment would be between $US 70 and 90 per barrel.

However, oil prices fell over five per cent on the back of the decision.

This, in turn, brought further pressure on Russian shares, forcing a trading halt on the dollar denominated RTS exchange.

At a previous session on September 10 the organisation took the decision to cut production by 520,000 barrels a day. As a result mutual production volume of the cartel is 28.8 million barrels per day.

OPEC has also called on non-member oil-exporting countries, such as Russia, to slash production.

Moscow has expressed concern about the falling prices, but says it's not ready to reduce output.

OPEC includes Algeria, Angola, Venezuela, Indonesia, Iran, Iraq, Qatar, Kuwait, Libya, Nigeria, United Arab Emirates, Saudi Arabia and Ecuador. Sixty-seven per cent of the world’s known reserves of oil are located in these countries.

Russia takes part in the work of the organisation as an observer.