As Organization of Petroleum Exporting Countries and 10 non-cartel oil producers reached a deal in December 2016, agreeing to cut oil output by a total of 1.8 million barrels per day in an effort to stabilize global oil prices, oil exporters had little doubt that there would be no need to prolong the six-month agreement beyond June 2017. However, the stock build-up together with lower-than-expected demand in early 2017 has put the alliance in a sensitive situation, requiring once again uniting their efforts on the market rebalancing. Reverse Effect of Oil Output Cut Deal The first six months of the 2017 proved to be quite difficult for the oil industry. Reacting to the Vienna oil cap deal, parties to the agreement hastened to raise their production to record levels in the last month of 2016 until the cap came into effect in January 2017. Meanwhile, compliance with production cuts was far from perfect in the first few months of the year. OPEC started with cutting its collective production by 1 million barrels per day (mb/d) in January, compared to the promised 1.2 mb/d, representing a 90-percent-conformity, according to the International Energy Agency (IEA). As for non-OPEC states — Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, South Sudan and Equatorial Guinea, which joined OPEC later in May — their compliance seriously lagged behind. Initially, 11 states cut their production only by 192,000 barrels per day (bpd) in January, leading to compliance… Read full this story
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