IT (CURRENT) Home Company Fuel Café OPEC Agreement OPEC agreement: “Soon demand for oil will exceed supply” – Claudio Descalzi A reduction of over 1Mb/d has been agreed, limiting total production to 32.5 million bpd. OPEC returns to controlling the market. On 30 November, at OPEC’s 171st Ordinary Meeting in Vienna, an agreement was signed to reduce production by 1.2 million barrels per day. Fourteen OPEC (oil-producing) countries met for the negotiations and, for the first time since 2008, made a decision that saw the crude oil price rise by 8 per cent to $50 a barrel, in line with that agreed in Algeria in September. The market reacted almost instantaneously; the Brent oil price, increased by almost $8 in just two days, ending up above the $50 threshold. In this critical period for the market, OPEC’s decision is undeniably important and goes beyond the effect on prices. For the first time in eight years, it seems countries are putting tensions aside and looking to work together. Having analysed the recent trends and the report prepared by the High-Level Committee formed in Algiers at the end of September, OPEC reaffirmed how current market conditions can be damaging for both consumer countries and producers alike, and how collaboration between the two sides, both within and outside the organisation, is fundamental to restore balance and reduce the current very high levels of stockpiling. The agreement, which came into force on 1 January 2017, is due to last six months. There is potential to extend it for a further six months, which will be assessed at the forthcoming OPEC meeting scheduled for 25 May 2017. Which countries signed up to the agreement? Commitments made by OPEC countries in Vienna will see oil production fall by 1.2 million barrels per day across the world from January, with probable impacts on price. OPEC production consistently increased throughout 2016. This growth was driven by the return of Iran (+0.7 million bpd) and record production from Saudi Arabia, which is promoting the new policy to shore up the price. Production in Russia, a non-OPEC country, is also accelerating thanks to the devaluation of the rouble, favourable taxation, low extraction costs and significant greenfield investment in the past. It is very interesting that, for the first time, a non-OPEC country – Russia – has agreed to intervene. This means that (the reduction) of 1.2 million (barrels of oil per day) may rise to 1.7 million. As supply currently outstrips demand by approximately 500,000-600,000 barrels, we will soon find ourselves in a situation where demand exceeds supply. This may rebalance prices and restart investment. CLAUDIO DESCALZI Of the 14 oil producing countries, Indonesia was suspended from OPEC, while Libya and Nigeria were exempted from the agreement. SCHEDULED OUTPUT REDUCTION BY EXPORTER GROUP OPEC Country Targeted Output January 2017(Mb/g) Cut (kb/g) Saudi 10 -486 Iraq 4.3 -210 Iran* 3.7 90 UAE 2.8 -139 Kuwait 2.7 -131 Venezuela 1.9 -95 Angola 1.6 -80 Algeria 1 -50 Qatar 0.6 -30 Ecuador 0.5 -26 Gabon 0.1 -9 Indonesia suspended suspended Libya exempt exempt Nigeria exempt exempt *Iran expands its production Statistics in brief 1.2 million bpd cut from January 2017 for 6 months (due to be revised on 25 May) Total OPEC production: 32.5 million bpd (vs. 33.6 million bpd in October) 1. Saudi Arabia 0.5 million bpd 2. Iran 3.8 million bpd target 3. Iraq -0.2 million bpd Non-OPEC countries ready to reduce production by 0.6 million bpd, including 0.3 million bpd from Russia. At the meeting of December 10, a further cut of 0.558 Mb/d has been agreed. ABO-About oil | OPEC Meeting Special 12/11/2016 - 3:02 PM We are an energy company. We are working to build a future where everyone can access energy resources efficiently and sustainably. Our work is based on passion and innovation, on our unique strengths and skills, on the quality of our people and in recognising that diversity across all aspects of our operations and organisation is something to be cherished. We believe in the value of long term partnerships with the countries and communities where we operate. Registered Head Office Piazzale Enrico Mattei, 1 00144 Rome, Italy Company Share Capital € 4.005.358.876,00 paid up Rome Company Register, Tax Identification Number 00484960588 VAT Number 00905811006 Branches Via Emilia, 1 and Piazza Ezio Vanoni, 1 20097 San Donato Milanese, Milan, Italy POLICIES Sitemap Accessibility Terms and Conditions Privacy Policy Cookie Policy Info Reserved Area