OPEC has put in place a production ceiling for the first time in eight years by deciding to limit its oil output to a range of 32.5 and 33 million barrels per day, a barrel drop of as much as 750,000 from OPEC’s output last month.
Oil prices increased by more than 5% after news of OPEC's cut of oil output on Wednesday.
The group decided to cut production during its talks in Algiers, and they will fine-tune the deal this November, according to delegates informed on the matter.
OPEC’s market management sheds light on promises for not only the Organization of Petroleum Exporting Countries but for the energy industry as a whole, including oil and gas companies both large and small.
The decision also reveals a healing relationship between Saudi Arabia and Iran who have had opposite positions on oil policy for the last two years that caused the extension of uncapped oil production earlier this year.
Despite OPEC’s decision for a production ceiling, analysts predict that the crude market could stay oversupplied for another year or two, unless large producing companies stop flooding the market.