11 Non-OPEC Countries Agree To Less Than 600,000 Oil Barrel Production Cut
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OPEC has managed to sway 11 non-members to reduce their oil production in an effort to decrease the worldwide oil glut and raise prices that have hurt the Saudi Arabian and Russian governments.
According to officials, non-members agreed to reduce the barrels by 558,000 for six months beginning Jan. 1. The deal can be renewed in six months. OPEC had hoped the countries would agree to a cut of 600,000 barrels.
OPEC made a decision Nov. 30 to cut its members’ output by 1.2 million barrels per day.
Khalid Al-Falih, Saudi oil minister, said this was a historic deal that would stabilize the market for the next year and boost industry investment. He said the deal was to boost the oil market’s natural rebalancing process.
The following 11 non-OPEC countries that agreed to the deal include:
- Russia
- Mexico
- Oman
- Bahrain
- Kazakhstan
- Malaysia
- Azerbaijan
- Equatorial Guinea
- Sudan
- South Sudan
- Brunei
Mohammed Barkindo, OPEC secretary general, said a majority of the production cuts would incur in Russia.
Major oil producers like Saudi Arabia and Russia have noticed a significant oversupply that caused prices to drop, and this drop in oil prices have led to less revenue in their government’s budget.
Will the cutbacks help to increase prices? That remains to be seen, considering the track record OPEC members have with surpassing the approved production quotas and the weak agreement from the lethargic worldwide economy.
There were already several non-OPEC countries like Mexico who saw production slow down because of the weak demand. According to AL-Falih, every country that participated is interested in bringing down the number of oil reserves. He said the countries themselves would decide how to address the issue whether the oversupply reduction happens from deliberate intervention or the approved agreement.
Oil fell from $90 a barrel in 2014 to $40 a barrel earlier in 2016. This sent gas prices under $2 for U.S. drivers. When OPEC announced its production cut, the price for oil closed six percent higher at $51.58.
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