OPEC Rejects Output Cut As Price Fall Continues

The Organization of Petroleum Exporting countries (OPEC) has decided to keep its output target on hold despite drastic oil price decline.

The cartels decision was keeping mind that with cheap crude in oversupply, a reduction would only cut into its share of the market without a lasting boost in prices and with others outside the cartel making up the difference.

OPEC has traditionally relied on output cuts to regulate supply and prices. Instead, the move to maintain a production target of 30 million barrels a day appeared to reflect acceptance of the Saudi view within OPEC that short-term pain had to be accepted for later gain.

The Saudis and their Gulf allies hope to put economic pressure on rival producers in the US, which need higher prices to break even. In the long term, that could help reaffirm OPEC's dominance of the oil market.

It would also be good news for consumers and oil-importing nations. The global price plunged $5 to a four-year low of $72.76 a barrel. As recently as June it was around $115.