Libya Announces OPEC’s Plans to Maintain Oil Prices
After a recent OPEC meeting, Libya announced the cartel’s intentions to cut oil production and therefore effectively maintain the current oil price. Certain countries, like Saudi Arabia, have been pumping more oil then their predefined limit, so it was determined in the OPEC meeting that member states will “strictly comply” with predefined targets for production.
From an economic perspective, this means that supply will drop, but since demand will not change drastically, the price per barrel of oil will remain at or above $100 per barrel. As the chairman of Libya’s National Oil Corporation puts it, “Practically, it will lead to a reduction of production as the ceiling is less than the actual production. It will shore up the market and help stop the deterioration of the price.” OPEC’s president determined that the reduction will amount to approximately “0.6 percent of the world supply.”
As Reuters points out, the surprising part of OPEC’s decision was not the intention to reduce production, as was to be expected, but rather the fact that OPEC has made these changes public, not in the discrete fashion anticipated. One wonders if Libya’s disclosure of this information has anything to do with its increasing ties to the West.
