What's going on?

Some of the world�s biggest oil-producing nations agreed on Friday to cut supply by another 500,000 barrels a day � and Saudi Arabia volunteered to go even further.

What does this mean?

The oleaginous OPEC group and its allies have cut production several times over the past three years: reduced supply boosts the oil price, theoretically meaning more profit all round. But that hasn�t worked in practice: only Kuwait, Angola, and Saudi Arabia have actually stuck to the deal this year, with Saudi actually cutting by more than it had to. That means it�s benefited less than others from higher prices.

The new agreement seems designed to encourage others to share the load � especially oversuppliers like Iraq, Nigeria, and Russia (which, while not officially an OPEC member, generally follows its policies anyway). And with Saudi Arabia saying it�ll continue its additional supply reductions, there�ll now be 900,000 fewer barrels of OPEC oil produced each day next year. That may be good news for oil investors � but environmentalists shouldn�t get too comfortable�

Why should I care?

The bigger picture: Pushing a string.

These cuts may not be enough to solve OPEC�s biggest problem: the US is now producing lots more shale oil, meaning global supply is increasing faster than demand. And a sluggish economy isn�t helping matters: demand for oil is closely linked to global economic growth. To really move the oil price up, OPEC will likely need to cut production even more � something its members seem unwilling to do.

For markets: Aramco�s big day.

Saudi Arabia had other big news last week: it finally announced a price for its state oil firm�s initial public offering (IPO). This week�s IPO will value Saudi Aramco at $1.7 trillion, making it the biggest public company in the world � and its at least $26 billion fundraising will also be the biggest IPO ever. Still, Saudi authorities may be disappointed: they initially planned to raise $100 billion at a $2 trillion valuation.