OPEC decides to curb overall output
Man oh man, what a day yesterday. That one is going to leave a mark. Oil is now sitting at just above $100/barrel. This is a level that the world seems to have indicated that it can absorb, and one that I have a feeling OPEC will move swiftly to defend. While OPEC is essentially powerless to increase production on the upside to fight high prices, it can easily turn off the spigots to protect the price of oil on the down side if it wants to.
After a series of scheduled meetings yesterday the Organization of Petroleum Exporting Countries announced that it has decided to trim its overall output by 520,000 barrels per day. This decision was a compromise between our "friend" Saudi Arabia and the countries that hate us, like Venezuela and Iran. It will be interesting to see whether OPEC actually sticks to its new production target, or if it continues to overproduce. Regardless of what happens, this was clearly a warning shot by OPEC essentially intended to say "Guys, we're watching...and we don't want oil to fall significantly below $100/barrel."
It is very possible that oil will fall below that psychological level in the next couple of months, but if it does look for OPEC to announce additional production cuts at its meeting in December to limit the slide. This is why in the great debate about whether oil will hit $75 or $150 first, I said neither...but that it will never sit at $75 for any extended period of time.
OPEC decides to curb overall output; prices rise