OPEC was followed by non-OPEC countries on its November 30, 2016 decision to reduce oil production.
12 non-OPEC producers including Russia and members of OPEC including Saudi Arabia have met in Vienna (Austria) for at least six hours of tough negotiation and eventually agreed to cut oil production by 558,000 barrels per day (bpd), a first since 2001 and a move that will probably bring more stability to the oil market after the oil prices fell from USD 100 a barrel since summer 2014 to around USD 50 in recent days, already up 17% since November 30, 2016.
“The deal will speed up the oil market stabilization, reduce volatility, attract new investments,” said Russian Energy Minister Aleksandr Novak while “it cements and prepares us for long-term cooperation,” added his Saudi counterpart Khalid al-Falih. The addition of the OPEC and non-OPEC projected reduction in oil production would amount to up to 1.75 million bpd, around 2% of the world’s oil production.
Cyceon has drawn a threefold conclusion from this agreement:
- The entente between Russia and Saudi Arabia has been instrumental, and one may talk about a possible oil condominium in the making.
- This agreement may signal indeed a longer term recovery start for oil prices.
- One shouldn’t overestimate the impact of the agreement that concerns just 2% of the global output in face of an unprecedented glut and a large number of production facilities still under construction.