On November 30, OPEC secured a cut in oil production from 33.8 million barrels a day (b/d) to 32.5 million b/d. As cheap oil from the global oil glut created budgetary shortfalls in oil-producing countries across the world, the severe economic challenges facing petro-states led to this special agreement, which is OPEC’s first to cut oil output since 2008, and the first time that non-OPEC Russia will back the cartel’s cuts to prop up prices since 2001. This unexpected decision sparked a huge rally in the price of both oil and gasoline. Given the state of regional turmoil from Syria to Yemen, however, it is legitimate to ask if politics will cause the agreement to fall apart in 2017.
The agreement was designed to reduce the production in global oil markets. It was successful despite pessimistic forecasts leading up to last month’s meeting in Vienna. After all, OPEC’s April 2016 meeting, held in Doha, ended with no deal, as member countries did not reach any consensus on the level of oil production. Iran participated in private talks led by Qatar, which currently holds the OPEC presidency, but Qatar failed to get Tehran on board because Iran argued it needed to regain market share lost during years of international economic sanctions. Whereas some OPEC members such as Ecuador and Venezuela favored cutting oil production, OPEC’s September 2016 meeting, held in Algeria, also failed to achieve this goal with Libya and Nigeria appearing reluctant to cut their oil production.
