Oil prices saw a rapid surge in price today as OPEC revealed plans for its first supply cut. The move comes after two years of oil prices dropping daily. The immediate impact saw prices rise by 8 per cent to $50 a barrel. The 14 member group will reduce daily output by an estimated 4.5 per cent, equivalent to 1.2 million barrels per day. The move comes as a surprise after the three main figureheads of OPEC, Iran, Iraq and Saudi Arabia agreed to cuts. This followed threats from all three parties to completely undermine the entire meeting.
It is expected that Saudi Arabia will absorb the majority of the production decrease, with Iran likely to agree freezing current levels at around 3.8 million barrels per day. The deal is expected to see a return to profitable margins for the oil industry which has suffered substantially in the past few years, with many of the major oil producing countries spiralling into recession as a result. The group has similarly criticised Russia for freezing production levels which were currently at a post-Soviet high. It is rumoured that President Putin and Iranian president Hassan Rouhani have spoken of co-operation in oil matters in recent months. Lukoil, the largest producer in Russia, remarked that they support the steps taken by OPEC to stabilise the market, and look forward to the upturn in markets.