For the first time in eight years, the Organization of Petroleum Exporting Countries has agreed to cut oil output, ratcheting down production by 1.2 million barrels per day in hopes of stabilizing the global oil market. News of the deal sent oil futures higher Wednesday morning.
With the cut, OPEC's production will drop to 32.5 million barrels a day, effective on Jan. 1, 2017.
"The agreement is contingent on key non-OPEC countries agreeing to also cut oil production by 600,000 barrels a day," NPR's Jeff Brady reports. Russia agreed to absorb half of that cut, dropping production by 300,000 barrels.
The OPEC reduction is equal to roughly 1 percent of current production worldwide.
"We have made great success today," said Mohammed Bin Saleh Al-Sada, Qatar's Minister of Energy and the OPEC Conference President.
"This agreement is out of a sense of responsibility" for all oil-producing nations, he said, as well as the "well-being and health" of the world economy.
He also said that the Russian Federation, a non-OPEC member, agreed to reduce its oil production by 300,000 barrels a day.
Rebalancing the market requires "courageous decisions," Al-Sada said.
He added that because Indonesia is a net importer of oil, the country has suspended its membership in OPEC rather than participate in the production cuts.
OPEC members agreed to the production cut during a meeting of energy ministers in Vienna.
In addition to forming a strategy to cope with rising oil production from non-OPEC members, OPEC's talks on new quotas have also wrestled with the question of how to handle production in Iran as Saudi Arabia's top rival emerges from international sanctions.
On the eve of today's meetings, OPEC Conference President Mohammed Bin Saleh Al-Sada said that while there were signs that a rebalancing of the global oil market is under way, "price volatility is still a significant concern."
He added that while non-OPEC oil producers had increased their supply by 1.5 million barrels a day in 2015, the consortium now expects non-members' oil supply to shrink by 800,000 barrels a day in 2016 — and to grow even less in 2017, at a rate of 200,000 barrels a day.
In contrast, he said, "World oil demand is expected to grow at healthy levels of around 1.2 million barrels a day in both 2016 and 2017."
In its most recent report on U.S. crude oil production, the U.S. Energy Information Administration said domestic output is forecast to average 8.8 million barrels per day in 2016, lower than 2015's average of 9.4 million barrels per day and roughly equal to the agency's 2017 forecast of 8.7 million barrels per day.
Citing OPEC's just-released 2016 World Oil Outlook, Al-Sada also looked farther into the future:
"Firstly, this remains a growth business, with oil demand in OPEC's 2016 World Oil Outlook reaching over 109 million barrels of oil a day by 2040, a healthy increase of over 16 million barrels a day.
"And secondly, this growth will require significant investments in the upstream, midstream and downstream. Overall, estimated oil-related investment requirements are close to $10 trillion in the period to 2040."