Wednesday`s decision was at least a partial reversal of OPEC`s decision to continue pumping – a policy that was originally intended to keep pressure on higher-priced producers like the United States and Canada. Despite falling prices, shale production in the United States has been surprisingly resilient as companies have reduced exploration and production costs. Russia will reduce 300,000 bpd of that amount, Novak said. He added that it would be gradual and by the end of March, Russia would produce 200,000 bpd less than in October 2016 of 11.247 million bpd – Russia`s highest production estimate to date. But this reduction would represent less than 1% of total world production from all sources and would hardly reduce an oil spill that has lowered prices. The agreement at this stage does not provide production targets for each country, which could give Saudi Arabia and other producers with unused capacity some leeway, energy experts say. But differences of opinion between Saudi Arabia – the world`s largest oil producer – and Iran have raised doubts about a deal. As part of the Algiers agreement, cartel members would vote at the group`s next formal meeting on 30 November in Vienna on the details of the production reduction of 700,000 barrels per day, up from just over 33 million barrels per day at present. “Without their consent, it`s technically unenforceable, so there`s always some uncertainty about it,” John Chairman of Alfa Energy Group in London told the BBC. The Saudis were hesitant to take the lion`s share of a cut while Iran refused to cut its own production, arguing that it had not yet regained its level of production after years of sanctions. He added that while non-OPEC oil producers increased their supply by 1.5 million barrels per day in 2015, The consortium now expects the non-member oil supply to shrink by 800,000 barrels per day in 2016 – and contract even less in 2017, at a rate of 200,000 barrels per day.
Despite the restrictions of the agreement, the news stimulated the markets. This is the first time the Organization of Petroleum Exporting Countries has decided to cut production since the last drop in oil prices during the financial crisis eight years ago. The current fall in prices, which is now two years old, is more persistent. And it was largely prompted by an OPEC decision in November 2014 not to cut production in response to the global flood. Some speculators were already inflated before the agreement. Pierre Andurand of Andurand Capital, a hedge fund, says the OPEC deal could push oil above $60 a barrel in a matter of weeks. He notes that speculators are betting primarily on OPEC`s failure and that large oil consumers may need quickly to protect themselves from rising prices. For example, airlines could guard against rising fuel costs. In its latest report on U.S. crude oil production, the U.S. Energy Information Administration said that in 2016, domestic production will average 8.8 million barrels per day, below the 2015 average of 9.4 million barrels per day and roughly in line with the Authority`s 2017 forecast of 8.7 million barrels per day.
The International Energy Agency (IEA) has warned that if OPEC does not comply with its recent commitment to reduce supply, the global oil market could remain oversupplied for a long time. Mixed signals are coming from Russia. (11.10.2016) “We have had great success today,” said Mohammed Bin Saleh Al-Sada, Qatar`s energy minister and chair of the OPEC conference. “This agreement is a responsible responsibility” for all oil-producing nations, he said, as well as the “well-being and health” of the global economy. At a meeting of the oil cartel in Vienna on Wednesday, OPEC members agreed on a proposal by Algeria to cut production by about 4.5%. Qatar`s Energy Minister and Conference President Mohammed Bin Saleh Al-Sada declared