Oil prices jumped 3 percent as the Organisation of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed to cut the production quota by 100,000 barrels per day (bpd).
The group made the decision at the end of the 32nd OPEC and non-OPEC ministerial meeting on Monday.
The drop in production quota is for October 2022, coming days after Saudi Arabia and Nigeria cited increased fluctuations that required constant assessment.
With this development, oil-producing nations and allies would reduce production to control market prices arising from potential Iranian crude deals and the prospect of a drop in U.S. inventories.
The oil cartel also agreed they could meet any time to adjust production before the next scheduled meeting on October 5.
They noted the “adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning”.
“The meeting noted that higher volatility and increased uncertainties require continuous assessment of market conditions and readiness to make immediate adjustment to production in different forms if needed and that OPEC+ has the commitment, the flexibility, and the means within the existing mechanisms of the Declaration of Cooperation to deal with these challenges and provide guidance to the market,” the statement reads.
Consequently, the group decided to reaffirm the decision of the “10th OPEC and non-OPEC Ministerial Meeting on April 12, 2020, and further endorsed in subsequent meetings including the 19th OPEC and non-OPEC Ministerial Meeting on July 18, 2021”.
It also reverted to the “production level of August 2022 for OPEC and non-OPEC participating countries for October 2022, noting that the upward adjustment of “0.1 mb/d to the production level was only intended for September 2022”.
At the end of the oil cartel’s decision, Brent crude, the international oil benchmark, moved up 3.64 percent to $96.41 a barrel while West Texas Intermediate crude jumped over 3.34 percent to $90.21 a barrel.