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OPEC Cuts Production To Stem Drop In Oil Prices

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Oil ministers at an emergency OPEC meeting Friday in Vienna decided to cut output by 1.5 million barrels a day beginning next month. It's an attempt to stem plunging prices for crude.

STEVE INSKEEP, Host:

It's Morning Edition from NPR News. I'm Steve Inskeep.

: try and drive the price up and risk pushing the world further into recession, or let the price slide and lose all that revenue. Today with prices below $70 a barrel, OPEC made a decision. In an emergency meeting in Vienna, OPEC ministers agreed to cut their oil production by one and a half million barrels. NPR's Rob Gifford is in Vienna for that meeting, and Rob, just put this briefly in perspective. What does one and a half million barrels add up to? It sounds like a lot.

ROB GIFFORD: It does sound like a lot, Renee. In fact, it's about five percent of daily output of all the OPEC producing countries. And bear in mind that the OPEC countries produce about 40 percent of global oil.

: So the aim is less oil out there on the market, prices go up or at least stabilize.

GIFFORD: That's the aim, and it's being pushed for by a lot of the oil producing countries such as Iran, such as Venezuela who've seen their income go down substantially over the last month since oil came down from its high of a 140 or so, and $140 a barrel in July. The big question of course is, will that work and will it hold the slide in the cost of a barrel of oil? And I think a lot of people, a lot of analysts here and around Europe are saying, not necessarily because demand is simply slowing down. So whatever they do even if they slash production, the market will continue to fall and it won't necessarily have the desired effect.

: And quite a bit of that demand has been coming recently from huge populations, China and India. What about that?

GIFFORD: Yes, the Chinese economy of course has been booming in recent years. All of the developing world, a lot of Asia has been booming has now been hit by this slowdown as well, and that of course has an impact on this. And this is really a part of why so many people feel that whatever OPEC does, we may be in for even lower oil prices. Countries like Saudi Arabia that produce a lot of oil can deal with that and they can live with a price of about 55, $60 a barrel. But these countries, Iran, Venezuela and others, they have set their whole state budget based on - a price of oil that is 90 to $100 a barrel. So these are the countries that have been pushing for this slash in production. And we'll just have to see in the coming days whether that does halt the slide of the price of oil.

: Finally, as you said the OPEC is a huge oil - a group of oil-producing countries, but there are other countries not in OPEC like Russia and other non-OPEC oil exporters, are they likely to cooperate with this reduction?

GIFFORD: Well, that's a really interesting question. And in fact, there has been a lot of cooperation recently between OPEC and Russia. Between them they produced more than half of global oil. There's a bit of concern, I think in the west that Russia could be getting closer to OPEC and helping to manipulate the price of oil. But, certainly analysts here seem to think it might be more of a political move by the Russians, as a result of what happened in Georgia, the west opposition to Russian moves in Georgia over the summer. And that Russia may be trying to sort of needle the west a bit by looking as though it's cozying up to OPEC, when in fact Russia has its own agenda and has not necessarily worked together with OPEC, the same on this issue.

: Rob, thanks very much.

GIFFORD: Thank you very much, Renee.

: NPR's Rob Gifford speaking to us from Vienna where OPEC ministers have agreed to cut oil production.

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