The much anticipated OPEC meeting that took place in Vienna, Austria, on the 6th
of December has finalised and reached an agreement of sorts. The significance of the meeting was at an all-time high due to the fact that oil prices have crashed more than 30%
within the last two months, which has caused pressures to intensify in oil exporting countries. The deal got off to a rocky start with no conclusive output levels decided upon the first day, which elongated the meeting to the next day. With pressures rising on all sides within the OPEC and its allies, the importance of agreeing on a deal was fundamental for the continuity of the organisation and for the maintenance of relationships afar.
After much needed deliberation, OPEC and its allies concluded, on the 7th
of December, on an agreement, including actual figures. The deal rested on the inclination that oil production would be cut by 1.2 million barrels per day (bpd)
. In light of the relations between OPEC and its allies and to highlight the strength of their relations, the 15-member OPEC cartel agreed to reduce output by 800,000 bpd. The remaining 400,000 bpd to be cut was part of the deal and will be contributed from Russia and the allied producers (non-OPEC). OPEC began capping supply in partnership with Russia in January 2017, and since then their relation has made significant progress, highlighted in this recent settlement. One of the highlights of the meeting in Vienna was Russia deriving at exact figures of output reduction, settling at a 2% decrease from their October production of 11.4 million bpd which equates to an estimate of 228,000 - 230,000 bpd.
However, although output figures were reached, relations were strengthened and decisions were made, there is still controversy around the deal that was finalised in Vienna. Many are still awaiting exact figures that will be cut from each member of OPEC and the oil-producing nations. Little has been released in terms of exact figures from individual members, aside from Saudi Arabia, who are aiming for an output level of 10.2 million bpd in January (down from 11.1 million in November) and Russia as previously stated. Additionally, there was some controversy in regards to members wanting to be exempt from the output reduction deal which lead the discussions to hit an impasse. Saudi Arabia originally refused to accept Iran`s bid for exemption, however in light of the US sanctions on Iran
, that have already significantly reduced their exports, Saudi accepted Iran`s plea for exemption.
Committed for the Long Haul
Although the deal portrayed a few minor hiccups, a prolonged meeting and some disagreements, an agreement was reached and relations indicate prosperity between OPEC members and their allies.
"This is partly driven by our commitment to start on the right foot in 2019 and to demonstrate that delivering on this agreement is not going to take a long, protracted period of gradually winding down. [...] We say what we mean and we deliver on what we say."
- Saudi Energy Minister Khalid al-Falih
This statement released by the Saudi Minister highlights the determination and motivation of their cause, in synchronisation with the rest of OPEC and their allies. Thus, their dedication to start 2019 strong and optimistically is an insight into the growing prosperity between Saudi Arabia, Russia and the rest of the OPEC members. The future of OPEC seems robust for now, until their mid-year meeting (pushed to April) to review changes and impacts on their new course of action.
New Year - New Ideas
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*** The sole purpose of the article above is to generate public discussion, it has no intention to constitute legal advice. ***