On Friday and Saturday, OPEC nations held another emergency summit. The summit was expected to confirm the agreement achieved by OPEC nations in late September. The agreement was expected to make OPEC cap their oil production. However, even despite the decision to cap their production in order to stabilize and support the international oil market, they do not expect the prices to start rallying this year. Moreover, they don’t even expect much higher oil prices in 2017.
As you probably know, the previous summit took place in late September and resulted in OPEC’s decision to cut their oil production by 750K barrels a day in order to support oil prices and prevent them from falling down on increasing global oversupply. The agreement is expected to be finally approved during the next OPEC summit scheduled for late November 2016.
During the recent summit, OPEC members arrived at conclusion that even despite the possibility of a stronger global economy in 2017, the prolonged period of ultra-low oil prices resulted in a flight of investment capital from the international oil industry, and this is going to last for the 3rd year in a row, which is an unprecedented event. The participants agreed to monitor the situation and discuss the ways to come out of the crisis amid low prices and few chances to see much higher oil prices over the next year.
At the same time, some non-OPEC members were also invited to the recent summit. So far, they haven’t confirmed their consent to cut or freeze their oil production as well. Big hopes have been laid on Russia and its decision. Not so long ago, President Putin said that Russia was ready to join the agreement and its oil production for the sake of supporting the international market of crude oil. However, later on, other energy officials from Russia said that Russia was not ready to cap its oil production in the near future. This means, that the situation remains ambiguous.
This is the key issue with the results of September’s summit. OPEC alone is not that influential anymore. The global market is not that sensitive about those changes made by OPEC anymore. This means that other major oil producers around the globe have to join the agreement for it to have a considerable impact on the global market of crude oil and back a stronger market.
