Last November, OPEC orchestrated an impressive feat: corralling all (or nearly all) of its members to sign on to relatively aggressive production cut deal, and then actually convincing everyone to follow through on those reductions beginning in January. OPEC’s estimated 94 percent compliance rate defied the cartel’s own history of cheating and mistrust, and OPEC has taken around 1 million barrels of oil production per day off the market.
They were initially rewarded for this. Oil prices rallied more than 20 percent in the month after the deal was announced and investors and analysts have been mostly bullish on crude prices ever since. But the cuts were not all that they seemed to be for two reasons: OPEC cut from record highs and countries exempted from the deal ramped up oil production in the fourth quarter of 2016, offsetting much of the reductions.
Member countries (excluding Indonesia, which is no longer a member) produced about 32.5 million barrels per day (mb/d) in August. That was the last month before the September Algiers accord, which was basically an agreement to agree to cuts at a later date.
By January, after nearly 90 percent of the 1.2 mb/d of cuts were implemented – or reductions of about 1.1 mb/d – the group still produced a relatively high 32.14 mb/d.
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