As expected today, OPEC announced it was making significant cuts in oil production, dropping it by 1.5 million barrels a day. That's about half-way between the 1 million to 2 million barrel cut analysts were looking for.
OPEC President Chakib Khelil was quick to communicate that the cuts weren't for the purpose of prices increasing, but to keep them from falling to unsustainable levels.
OPEC came under fire from some quarters for possibly fueling the flames of the economic crisis rather than helping it out.
Still, Khelil added that if prices continue to drop, OPEC was ready to step in at any time and reduce production again until prices stabilize.
Even with the oil production cuts, prices plunged by 5 percent today, dropping to below $63 a barrel at one point in the trading session. At about noon EST prices stood at $64.51 a barrel.
As Commodity Surge says, here's OPEC's problem:
"OPEC is of course cautious in their approach, as some of the other oil-producing nations pressured them to cut production by at least 2 million barrels a day. The problem they face is if they cut it too much, and prices surge too high, consumers will cut back even more on expenses, and the plan would backfire."
OPEC seems to be attempting to keep prices from falling below $60 a barrel.
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