OPEC will reduce the supply of nearly 700,000 barrels of crude oil per day, marking the first such agreement in the last eight years aimed at stabilizing the global market for black gold. The decision made at the meeting in Algiers still requires official confirmation at the OPEC meeting at the end of November, but it is a significant step after Saudi Arabia began its strategy in 2014 to flood tankers and reserves with as much oil as possible. The move also comes at a time when the process of balancing the state of the global market has stalled again, as several members of the oil cartel, along with Russia, have increased their production in recent months.
– Although the decision was made to draw a ceiling on the amount of supply until the total amount of crude oil on the market is reduced in the long term, there are still very important unanswered questions at this moment. Which countries will cut production, given that Nigeria, Libya, and Iran are expected not to be among them? Who will reduce barrel-for-barrel due to possible increased production from Nigeria and Libya? Will they follow independent production assessments or will it depend on the figures from individual countries, as they are usually higher? And finally, when will the production cuts take effect, especially if no agreement is reached before the end of November, as in that case, market results may only be expected in January next year – lists Ole Hansen, head of commodity market analysis at Saxo Bank.
Possible answers indicate that Saudi Arabia will have to be the country that cuts its production the most, but the oil kingdom is unlikely to have problems producing fewer barrels at a higher price, especially considering that they are already reducing production at this time of year.
