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Despite the predictions that the Oct. 23 meeting would be contentious, OPEC decided in 90 minutes to cut its oil production by 1.5 million b/d and allocated the cuts among its members. The final cut was a compromise between the conservative Gulf producers who were arguing for a cut less than 750,000 b/d and the price hawks who wanted a cut of 2 or more million b/d.

Among the more interesting features of the run-up to the meeting were appeals to non-OPEC producers Russia, Norway, and Mexico to share the burden by cutting production along with OPEC. These appeals fell on deaf ears, but Russia, for obvious reasons, seems interested in helping prop up world prices.  OPEC’s Secretary General met with Russia’s President for the first time and Moscow and is talking about setting up an oil reserve so Moscow could become the swing producer and control prices.

The markets were not impressed by OPEC’s production cut and prices fell more that $4 a barrel to $64 after it was announced. OPEC members are already talking of additional emergency meetings and further production cuts if prices continue to fall. Whether the increasingly desperate members will adhere to these group decisions has yet to be seen. The average price received for OPEC oil is usually around $10 less than the benchmark New York price . If prices fall much more, the revenues received by most OPEC members, and other major oil exporters as well, will be below that needed to support government budgets and social programs.

For the immediate future, oil prices, production and OPEC’s fate will hinge on the state of financial markets and the availability of loans. Although governments have dedicated trillions of dollars to support liquidity in the financial markets in recent weeks, it is not yet clear whether this support is as yet having the desired effect.