Olivier and Mann – OPEC has displayed a high level of self-control by staying with the agreed output reductions.
The bloc has reached 90 percent of its objective in January for its part in reducing output equivalent to 1.8 million barrels each day, according to the International Energy Agency (IEA).
Crude oil futures rose 1% to $53.50 per barrel following the report from the IEA, who observe the trading of oil between advanced economies.
OPEC has negotiated numerous output reductions over twenty-seven years and during those years, OPEC’s members have produced more than was agreed in all but a few months.
The Kingdom of Saudi Arabia (KSA) surprisingly overshot its quota reduction of 490,000 barrels a day by 70,000 barrels. Qatar and Angola also cut more than was agreed to.
The initial reduction is truly one of the biggest cuts ever recorded even including OPEC’s previous output reduction programs, said the IEA.
The deal went into effect at the start of 2017 and is pencilled in to end by June, although some members of the bloc have signified their readiness to extend.
A number of non-OPEC members like Russia, Mexico, and Kazakhstan have joined OPEC to hold down production.
The IEA disclosed that Russia has already cut its oil production by 100 thousand barrels of oil a day during January and the country has agreed to progressively bring in a cut of 300 thousand barrels. Official records have yet to come from Oman and Kazakhstan although expectations are that they too will hit their targets.
The output reduction which originated from a very high production level is intended to support oil prices and relax all budgetary deficits being experienced by major oil exporters.
The strategy has started to serve its purpose, the increase in oil prices has stimulated investments and production, like the U.S. shale industry that is now back in business after being battered by the drop in oil prices in 2014.