Wednesday, November 30, 2016

OPEC Reaches Deal to Cut Oil Production


 
 
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OPEC reaches a deal to cut Oil production by 1.2 million barrels a day, which will represent approximately 1% of global production. The goal from the reduction in oil production is I raise the price of oil to approximately $ 55 to $60 a barrel. This will help to improve petroleum dependent economies, which have been suffering over the last two years. This agreement will help to implement a cartel with the oil producers. OPEC has no released which countries will reduce their oil production and by how much, but Iran has implied they would be willing to reduce production in early 2017, but would not agree to stop increasing production in the short run. Indonesia suspended their OPEC membership on Wednesday. While Teheran, is nearing an agreement to reduce oil production3.97 million barrels a day by early next year. A key demand from Saudi Arabia is that OPEC members use independent estimated of their production as a baseline for their cuts. Iraq is using independent estimated of its output at 4.55 million barrels a day, but is only willing to freeze that level but not cut production completely. This is somewhat promising for the oil industry if it actually pans out. If oil production is reduced by many of the OPEC member, price of oil will increase and economies can start to recover. On the other hand, with some members only agreeing to freeze production, how will this help to improve the long run? How long will they freeze production? Will we be back in the same position within a year if they only freeze production for a short period of time?
 
 
 

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