19 December 2008 | Jake Kanter
The Organisation of the Petroleum Exporting Countries (Opec) has made a record cut in oil production to address over supply in the market.
During a meeting of the group in Algeria this week, the organisation reduced production levels by 2.2 million barrels a day. It marks the third cut since September, meaning a total reduction of 4.2 million barrels a day over the last four months. Total production now stands at 24.845 million barrels a day.
The group said that the volume of crude oil entering the market was "well in excess" of demand and stocks in OECD countries are "well above" their five-year average. It added the poor economic conditions had led to the "destruction" of demand, resulting in an "unprecedented" fall in prices. The Opec crude oil basket price was $39.48 (£26.20) today.
"We don't have an oil price target with this decision [to cut production], but we hope that the prices will stabilise," said Chakib Khelil, minister of energy and mines in Algeria and president of Opec.
John Hall, managing director of energy procurement consultancy John Hall Associates, said: "It is disappointing that Opec is able to ignore prices when they reach unsustainable levels for consumers but can then justify whatever action it believes is needed to hold up prices when they reverse and fall."
The government is hosting an energy summit in London today with around 30 oil and energy ministers from key oil producing countries. They are meeting to discuss how the oil supply market could be improved to help stabilise its price. "All of us have an interest in less volatile oil markets that function more effectively," said energy secretary Ed Miliband.