The Journey to $60/bbl and Market Balance

Oil price has continued to rally as a result of OPEC and non OPEC nations first ever agreement since 2001 to jointly cut down on oil production by about 1.8 million bbl/day; 1.2millon barrels from OPEC nations and 558,000 barrels/day from Non-OPEC nations starting January, 2017.

The world is hopeful that this reduction which is about 2% of global production will be big enough to make a positive impact to the global oil market which has been ridden by over supply that led to 75% decrease to the oil price.

Saudi Arabia has shown a great level of Leadership and committment in sealing this deal and has even promised to cut down further down from what was agreed during the meeting.

The worrying concerns are the following;

  • Will the OPEC and non OPEC nations honour this agreement come 2017.
  • Will Iran maintain/reduce/increase it’s output when/if the OPEC and Non OPEC nations cut output.
  • How will OPEC react to a loss of Market share to Iran if they decide to seize the opportunity to their benefit.
  • Will this agreement pull the global market into the much needed balance
  • Will shale oil rebound undermine the anticipated gains of this agreement

if the above concerns can be taken care of, this will be a great stride towards recovery for the global crude oil market.

You May Also Like

Leave a Reply