The group released a statement on 24 October saying the move was warranted as the drop in oil prices could lead to the cancellation of existing oil projects, resulting in a medium-term supply shortage.

“The conference noted that oil prices have witnessed a dramatic collapse, unprecedented in speed and magnitude which may put at jeopardy many existing oil projects and lead to the cancellation or delay of others,” said the oil cartel.

The group will lower its current production ceiling of 28.8 million b/d by 1.5 million b/d to 27.3 million b/d, from 1 November. It is the first production cut made by Opec in two years.

The decision will be reviewed at its next scheduled meeting in Algeria on 17 December.

Opec also called on non-Opec producers and exporters to restore prices to “reasonable levels”, saying it cannot be expected to bear the burden of restoring equilibrium to the market on its own.

It says the impact of the financial crisis has exacerbated an earlier slowdown in oil demand, adding that forecasts indicate the current fall in demand will deepen, despite the approach of winter in the northern hemisphere.

Opec has instructed its member countries to make the following cuts: Saudi Arabia 466,000 b/d, Iran 199,000 b/d, UAE 134,000 b/d, Kuwait 132,000 b/d, Venezuela 129,000 b/d, Nigeria 113,000 b/d, Angola 99,000 b/d, Libya 89,000 b/d, Algeria 71,000 b/d, Qatar 43,000 b/d and Ecuador 27,000 b/d.

West Texas Intermediate (WTI) oil for December delivery on the New York Mercantile Exchange traded at a 16-month low of $63.41 after the announcement on 24 October.

The price of WTI crude has slumped by more than half since hitting an all-time record of $147.27 set on 11 July.