This is the third part of ripples series. For the previous parts click on :-
PART 1
PART 2
PART 1
PART 2
The oil prices have been under pressure for quite some time due to the supply glut. This has diminished the profit margins of many oil exporting countries.
The organization finally attempted its first production cut since 2008.
Despite many political difficulties, a September 2016 decision to trim
approximately 1 million barrels per day was codified by a new quota
agreement at the November OPEC conference. The agreement (which exempted
disruption-ridden members Libya and Nigeria) will be in effect for the
first half of 2017 – alongside promised reductions from Russia and ten
other non-members, offset by expected recoveries in the US shale sector,
Libya, Nigeria, and spare capacity.
International oil prices rose to an 18-month high of more
than $58 a barrel after the Organization of Petroleum Exporting Countries and
several non-members agreed on Dec. 10, 2016 to end two years of unfettered production
and instead cut output to increase price in the market.
Despite this agreement to cut oil production and thereby reducing supply Crude still slipped about 5% from that peak
as traders await proof that OPEC will follow through on the deal. Producers
have already removed 1.5 million barrels a day of supply from the market, Saudi
Minister of Energy and Industry said in Vienna.
Representatives of OPEC and several other major oil producers met in Vienna for their first meeting to monitor compliance with an
agreement to cut output. It remains to be seen as to how effective this agreement is in bringing down the supply and increasing prices of crude oil.
With the prices slipping again it will become imperative for the OPEC to prove that the group is serious about finally eliminating a three-year crude oversupply and dispel skepticism stemming from previous unfulfilled promises. The outcome will depend on the degree of compliance.
Whatever be the out come on the compliance front, this decision by OPEC is bound to create Ripples in the global markets.
4 comments:
Try to mention points how it started i.e. supply glut, how american companies are increasing their supply in order to tap the market share,and how it has affected american companies and making them vulnerable with every $ drop in oil price.
The American supply to tap market share has been clearly stated in the blog. ("offset by expected recoveries in the US shale sector").
Overall an informative post.
Thank you guys for the feedback.
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