OPEC’s attempt at rhyme and reason

After two years of squabbling over how to respond to low oil prices, OPEC has finally arrived at a solution. At its meeting on Wednesday, the cartel resolved to cut production for the first time in eight years. Beginning Jan. 1, OPEC’s members will collectively reduce their production, based on October levels, by around 1.1 million-1.2 million barrels per day, with Saudi Arabia, Iraq, Kuwait and the United Arab Emirates bearing the brunt of the drawdown. The deal, which has been under discussion since September, also aims to reduce production outside the bloc by 600,000 bpd. (Russia has already committed to take 300,000 bpd out of production, and OPEC is set to negotiate similar arrangements with other non-members in Doha, Qatar, on Dec. 9.) News of the prospective cut sent oil prices soaring almost immediately: Brent, the global benchmark for light sweet crude oil, jumped 8.54 percent on Wednesday, hitting $51.36 per barrel. Perhaps more important, the agreement demonstrates that for all its divisions, mutual distrust and weak enforcement measures, OPEC can still work together when the need arises.

The biggest stumbling block in negotiating the agreement was the bitter rivalry between two of the bloc’s most prolific producers, Iran and Saudi Arabia — neither of which would yield to the other’s demands. But even they can leave Vienna satisfied with the arrangement. Despite the great pains it required to reach, the deal does not represent a significant shift in strategy for either country.