For the first time since 2001 OPEC and non-OPEC members have reached an agreement to scale back oil production in an effort to even out the global market and ease unrest in some countries. Saudi Arabia, Iraq, Kuwait and the United Arab Emirates have already spoken with customers making good on their efforts to cut back production.
Aside from Russia other non-OPEC members included Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan.Each either attended the meeting or commented on the meeting Saturday. The Opec countries have been known not to adhere to such promises as these and analysts are skeptical. The world will be watching Russia closely as they have committed to 300,000 barrels less per day as oppposed to the original number at the first meeting. Traders and analysts alike are looking for money to be made but will have to wait and see if Russia does indeed manipulate the market using the 2016 numbers or inflates the market using projected 2017 numbers.
Another factor to be considered in the US is the validity of shale production.Many believe that Trump’s victory will loosen stricter regulations placed on fracking and free up more room for companies to compete in shale production. Occidental Petroleum, Chevron, Pioneer Natural Resources, and ConocoPhillips are among those companies gearing up to take advantage of the projected boom in shale production. The fracking industry has taken a lot of criticism from environmental groups and activists. If the shale industry does become as lucrative as projected and regulations are loosened, many jobs will be introduced into the economy.
The OPEC cartel has had a grip on the world’s oil supply since 1960 when it was founded in Bagdad. OrIginally it consisted of only Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, though the cartel would grow into an eventual oligopoly that holds it’s annual meeting in Vienna, Austria. OPEC states their mission is “to coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.” This statement understates the cartel nature of the organization who often uses their oligopolic power for their own gain and for that of major interests even in times of war or unrest.
If, however, the Russians and other non-OPEC members continue to produce and distribute oil, the US sees an uprise in the fracking industry, then OPEC may not have such a stronghold over the global oil market as they once had. Like all projected data, the analysts can analyze all they choose but in the end, the outcome ultimately rests upon the shoulders of Russia and other non-OPEC members. Although, OPEC members themselves have a history of non compliance. At any rate, prices have dropped 1% already according to the market.If this trend continues and each OPEC and non-OPEC country do make good on the cutbacks, the arrangement should certainly work out for the OPEC cartel.